Current-Account Reversals in Developing Countries: The Role of Fundamentals
- Cite this article as:
- Bagnai, A. & Manzocchi, S. Open Economies Review (1999) 10: 143. doi:10.1023/A:1008365318228
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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.