Current Account Sustainability in Latin America: Considering Nonlinearities

Serie

• Borradores de economía

Resumen

• We test current account sustainability based on the framework developed by Hakkio and Rush [1991] and Husted [1992] using a two-regime threshold vector error correction model. This methodology allows us to characterize short-run nonlinearities in the current account. We estimate the model for four Latin American economies: Chile, Brazil, Colombia, and Mexico. We find a long-run relationship between the current account components, which implies strong sustainability for Chile and Mexico and weak sustainability for Colombia and Brazil. For the first two countries, the predominant regime is associated with a current account surplus. In contrast, for Colombia and Brazil, the prevailing regime corresponds to a situation in which there is a long- run deficit. In general, the impulse response analysis shows that expenditure and income shocks have positive and significant responses in the predominant regime for both series.

autores

• Melo-Velandia, Luis Fernando
• Ordoñez-Callamand, Daniel
• Valencia-Arana, Oscar

fecha de publicación

• 2017-03

Área temática

• C32 - Modelos de series temporales; Regresiones cuantiles dinámicas; Modelos dinámicos de tratamiento; procesos de difusión; representación de espacios de estados
• C52 - Evaluación, contraste y selección de modelos
• F32 - Ajustes de la balanza por cuenta corriente; Movimientos de capital a corto plazo

Enfoque geográfico

• South America  Continent

Líneas de investigación

• Current Account Sustainability
• Generalized Impulse Response Function
• Threshold Vector Error Correction

Identificador de objeto digital (DOI)

• https://doi.org/10.32468/be.987

Issue

• 987