Open Economies Review

, Volume 10, Issue 2, pp 143–163

Current-Account Reversals in Developing Countries: The Role of Fundamentals

  • Alberto Bagnai
  • Stefano Manzocchi

DOI: 10.1023/A:1008365318228

Cite this article as:
Bagnai, A. & Manzocchi, S. Open Economies Review (1999) 10: 143. doi:10.1023/A:1008365318228


This paper studies episodes of current-account reversal in developing countries (DCs) in the period 1965–1994. First, a number of persistent shifts (“reversals”) in the current-account balance dynamics are identified by structural break and segmented trend tests; then, the relationship between these reversals and a set of fundamentals suggested by the intertemporal approach to the current account is investigated in a panel-data set-up. We find that fundamentals play a different role in episodes of persistent deterioration or improvement of the current-account balance in DCs.

current account dynamicsdeveloping countriesunit rootsstructural breakspanel data

Copyright information

© Kluwer Academic Publishers 1999

Authors and Affiliations

  • Alberto Bagnai
    • 1
  • Stefano Manzocchi
    • 2
  1. 1.Dipartimento di Economia PubblicaUniversità di Roma “La Sapienza”RomeItaly
  2. 2.Dipartimento di EconomiaUniversità di PerugiaPerugiaItaly