A bivariate vector-autoregression model is used to test causal relations between the current account and the capital account in four emerging market economies. The results show that high capital mobility could be a major cause of current account instability. The paper recommends making nominal exchange rate sufficiently flexible to avoid inconsistencies between short-run and long-run real exchange rates.
A bivariate vector-autoregression model is used to test causal relations between the current account and the capital account in four emerging market economies. The results show that high capital mobility could be a major cause of current account instability. The paper recommends making nominal exchange rate sufficiently flexible to avoid inconsistencies between short-run and long-run real exchange rates.
A bivariate vector-autoregression model is used to test causal relations between the current account and the capital account in four emerging market economies. The results show that high capital mobility could be a major cause of current account instability. The paper recommends making nominal exchange rate sufficiently flexible to avoid inconsistencies between short-run and long-run real exchange rates.