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On the Sustainability of Current Account Deficits: Evidence from Four ASEAN Countries

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dc.contributor.author Fountas, Stilianos en
dc.date.accessioned 2010-08-20T11:00:15Z en
dc.date.available 2010-08-20T11:00:15Z en
dc.date.issued 2002 en
dc.identifier.citation Baharumshah A. Z., Lau E. & Fountas, S. (2002) "On the Sustainability of Current Account Deficits: Evidence from Four ASEAN Countries" Department of Economics, National University of Ireland, Galway. en
dc.identifier.uri http://hdl.handle.net/10379/1285 en
dc.description.abstract This paper examines the sustainability of the current account imbalance for four ASEAN countries (Indonesia, Malaysia, the Philippines and Thailand) over the 1961-1999 period. To this end, we utilize the intertemporal budget constraint (IBC) model to explain the behavior of the current account in these countries. The analysis is based on various unit root and cointegration procedures including those allowing for a structural break to deal with the major shortcomings of previous studies. The empirical results indicate clearly that for all countries, except Malaysia, current account deficits were not on the long-run steady state in the pre-crisis (1961-1997) era. This leads us to conclude that the current accounts of these countries were unsustainable and did not move towards external account equilibrium. Moreover, the persistent current account deficits might serve as a leading indicator of financial crises. In contrast, we find strong comovement between inflows and outflows in Indonesia, the Philippines and Thailand in the period including the post-crisis years, while Malaysia was on an unsustainable path. This is because macroeconomic performance of most of the ASEAN countries has changed dramatically since the onset of the Asian crisis in mid-1997. The evidence suggests that action to prevent large appreciations should have been taken prior to the 1997 crisis. en
dc.format application/pdf en
dc.language.iso en en
dc.publisher National University of Ireland, Galway en
dc.relation.ispartofseries working papers;0062 en
dc.subject Economics en
dc.subject Current account deficits en
dc.subject Sustainability en
dc.subject Intertemporal budget constraint en
dc.subject ASEAN en
dc.title On the Sustainability of Current Account Deficits: Evidence from Four ASEAN Countries en
dc.type Working Paper en
dc.description.peer-reviewed peer-reviewed en

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