Financial Regulation and the Current Account [electronic resource] / Tomasz Wieladek.
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TextSeries: IMF Working Papers; Working Paper ; No. 12/98Publication details: Washington, D.C. : International Monetary Fund, 2012Description: 1 online resource (51 p.)ISBN: 1475502885 :ISSN: 1018-5941Subject(s): Capital Account Openness | Capital Account | Current Account Deficit | Current Account Imbalances | Financial Institutions and Services: Government Policy and Regulation | Financial Regulation | Algeria | Bulgaria | El Salvador | Romania | United KingdomAdditional physical formats: Print Version:: Financial Regulation and the Current AccountOnline resources: IMF e-Library | IMF Book Store Abstract: This paper examines the relationship between financial regulation and the current account in an intertemporal model of the current account where financial regulation affects the current account through liquidity constraints. Greater liquidity constraints decrease the size and persistence of the current account response to a net output shock. The theory is tested with an interacted panel VAR model where the coefficients are allowed to vary with the degree of financial regulation. The current account reaction to an output shock is 60% larger and substantially more persistent in a country with low financial regulation than in one with high financial regulation.
This paper examines the relationship between financial regulation and the current account in an intertemporal model of the current account where financial regulation affects the current account through liquidity constraints. Greater liquidity constraints decrease the size and persistence of the current account response to a net output shock. The theory is tested with an interacted panel VAR model where the coefficients are allowed to vary with the degree of financial regulation. The current account reaction to an output shock is 60% larger and substantially more persistent in a country with low financial regulation than in one with high financial regulation.
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