Model Of Current Account Research Articles

The dynamic relationship between macroeconomic factors and current account balance: Panel evidence from 28 African countries

This study empirically tests the validity of the current account theory using a panel ARDL estimation technique for 28 African countries from 1980 to 2019. Also, the study examined the effect of private consumption, income, government spending, investment, and inflation on the current account balance. Applying data to Obstfeld and Rogoff‘s inter-temporal current account model, the results show that the current account theory holds for the selected SSA countries in the short run but not in the long run. In addition, the study finds that an increase in private consumption, government expenditure, and investment leads to the deterioration of the current account balance in both the long and short run. In contrast, higher GDP per capita and inflation improved the current account balance in both the long and short run. The novelty of the article is that it is the first study to empirically test the validity of Obstfeld and Rogoff's inter-temporal current account model. This study also contributes to the literature focusing on developing countries, specifically, African countries. The study recommends that policymakers adopt policies to promote private savings, economic growth, fiscal discipline and macroeconomic stability to stimulate the current account balance in the region.

INTANGIBLE ASSETS AND THEIR IMPACT ON THE BALANCE SHEET OF IRAQI BANKS

The most significant changes in the modern business environment during the 1990s have been the increasing importance of intangible elements of knowledge, technology, individual skills, and other factors that have become the main source of wealth and income and the enhancement of the competitive advantages of the business to survive and grow. This has been accompanied by a higher market value of the business than double its book value, especially in knowledge-intensive sectors such as communications, medicines, and software. This is due to the current accounting model's inadequate treatment of intangible assets, which are recognized as assets only when purchased from third parties. The research aims to attempt to provide an accounting framework for intangible assets that avoids previous deficiencies and criticisms to increase the effectiveness of financial reporting in light of contemporary developments in the business environment by assessing the accounting treatment of intangible assets purchased in the standards issued.

Introducing house prices to the intertemporal current account model: An application to the European Union

The last 30 years have been marked by significant and persistent external imbalances. To examine the relationship between the current account balance and its determinants, particularly house prices, we extend the intertemporal model of the current account. We introduce the prices of durables to the theoretical model to account for house prices. In addition to house prices, the theoretical model also incorporates fiscal balance, income, investment, and government spending to explain external imbalances. We test the model for the European Union's member states between 2000 and 2019 using a system generalized method of moments model, which performs well empirically as the coefficients are significant and have the predicted sign. Our findings indicate that rising house prices exacerbate the current account balance due to the wealth effect on consumption. Within the European Union, house prices have the most negative impact on the current account balance in Central and Eastern European countries. • We examine how house prices affect the current account balance. • We add the prices of durables to the intertemporal model of the current account to account for house prices. • We apply the theoretical model to EU countries from 2000 to 2019 using the system GMM estimator. • We find that rising house prices worsen the current account balance through the wealth effect on consumption. • The impact of house prices on the current account differs significantly in CEEC when compared to other EU member states.

Methodological issues in the estimation of current account imbalances1

The study outlines the main challenges in measuring external imbalances via a “current account (CA) model”, from which a CA “norm” may be derived and against which the actual CA is appraised. The selection of both the dependent and explanatory variables and technical issues in the estimation procedure are amongst the concerns raised. The impact on CA modelling of global trends, such as the expansion of MNEs, and of the COVID-19 pandemic is also discussed. The paper does not prescribe fully-fledged solutions, but rather provides awareness and hints on how to possibly tackle at least some of these challenges.

Methodological Issues in the Estimation of Current Account Imbalances

The study outlines the main challenges when setting up a “current account (CA) model” in order to measure external imbalances. This model is a reduced-form relationship between the CA balance and a set of CA fundamental and policy drivers, from which a CA “norm” may be derived and against which the actual CA balance is appraised. After having formally outlined a standard CA model similar to those developed by the main international institutions, the paper raises several concerns in CA modelling, amongst which the measurement and selection of both the dependent and explanatory variables and some technical issues in the estimation procedure. Recent trends affecting the CA balance, such as the expansion of global firms and the rise in corporate saving, as well as the outbreak of the COVID-19 pandemic, are also discussed. The paper does not prescribe fully-fledged solutions to the manifold issues discussed, but rather aims to raise awareness of the latter, as well to provide some hints on how to tackle at least some of these challenges.

Housing prices and trade surpluses in China: An inter-temporal approach

This paper develops an inter-temporal current account model to study the impacts of expected rising housing prices on trade surpluses in China. The model shows two channels working in opposite directions. The first channel is the intra-temporal substitution channel. It discourages current consumption of tradable goods, leading to trade surpluses. The second is the inter-temporal substitution channel, which instead leads to trade deficits. When intra-temporal channel dominates, expected rising housing prices lead to trade surpluses. However, borrowing constraints on housing purchases may weaken the intra-temporal substitution channel and thus weaken the positive correlation between expected housing prices and trade surpluses. We show empirically that expected rising housing prices lead to trade surpluses in China. We also identify possible reason for this finding: strong intra-temporal substitution elasticity due to large male to female sex ratio in China. We further show that the positive relation between expected rising housing prices and trade surpluses is weaker in regions with more stringent borrowing constraints, consistent with our model’s prediction.

Ethical and Professional Implications of Blockchain Accounting Ledgers

I propose a framework for Blockchain Accounting Ethics. The area of Blockchain ethics in general has been little studied, with no studies on Blockchain Accounting ethics that I am aware of. I have identified the following preliminary areas of ethical concern: Data privacy and security; power and storage usage; issues related to smart contracts; anti-trust; and taxes. There are major problems with the current accounting model that Blockchain will solve. Current accounting records sit on corporate computer systems that are subject to data corruption. Under Blockchain, transactions are verified at the time of transaction with counterparties, resulting in a reliable time-stamp. Accounting policies and estimates can be permanently embedded into the transaction record, making them free of opportunism by management. Once the record is entered, management cannot alter or destroy it, as an infinite number of exact copies exist on the Blockchain. Blockchain accounting will also enable cheap audits by multiple auditors, which is currently prohibitively expensive.

Current account dynamics under information rigidity and imperfect capital mobility

The current account in developed countries is highly persistent and volatile in comparison to their output growth. The standard intertemporal current account model with rational expectations (RE) fails to explain the observed current account and consumption dynamics. The RE model extended with imperfect capital mobility by Shibata and Shintani (1998) can account for the consumption dynamics, but only at the cost of the explanatory power for the volatility of the current account. This paper replaces RE in the intertemporal current account model with sticky information (SI) in which consumers are inattentive to shocks to their income. The SI model can better explain a persistent and volatile current account than the RE model but it overpredicts the persistence of changes in consumption. The SI model extended with imperfect capital mobility explains both the current account and consumption, provided that sufficiently high degrees of information rigidity and imperfect capital mobility are considered.

House Prices and Current Account Evolution in the European Union: An Intertemporal Approach

Based on the dynamic equation of the intertemporal current account model, we estimated a current account balance between 2000 and 2014 for the EU countries due to the role played by different determinants. More precisely, we presented the effect of fiscal balance and house prices along with other variables for the purpose of explaining the external disequilbria among the member states. Our results indicate that the last real estate bubble has worsened the external imbalances of the members within the European Union. We also identified an asymmetric effect of real estate prices upon the current account of various countries within the European Union.

Current Account Dynamics Under Information Rigidity and Imperfect Capital Mobility

The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in consumption. The RE model extended with imperfect capital mobility by Shibata and Shintani (1998) can account for persistent changes in consumption, but only at the cost of the explanatory power for the volatility of the current account. This paper replaces RE in the intertemporal current account model with sticky information (SI) in which consumers are inattentive to shocks to their income and infrequently adjust their consumption. The SI model can better explain a persistent and volatile current account than the RE model but it overpredicts the persistence of changes in consumption. The SI model extended with imperfect capital mobility almost fully explains current account dynamics and the persistence of changes in consumption, if high degrees of information rigidity and imperfect capital mobility are taken into account.

Current Account Dynamics Under Information Rigidity and Imperfect Capital Mobility

The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in consumption. The RE model extended with imperfect capital mobility by Shibata and Shintani (1998) can account for persistent changes in consumption, but only at the cost of the explanatory power for the volatility of the current account. This paper replaces RE in the intertemporal current account model with sticky information (SI) in which consumers are inattentive to shocks to their income and infrequently adjust their consumption. The SI model can better explain a persistent and volatile current account than the RE model but it overpredicts the persistence of changes in consumption. The SI model extended with imperfect capital mobility almost fully explains current account dynamics and the persistence of changes in consumption, if high degrees of information rigidity and imperfect capital mobility are taken into account.

A novel multilayer AAA model for integrated applications

Nowadays, one of the problems in current authentication, authorization and accounting (AAA) model is lack of accurate roadmap of access management in integrated applications based on operational needs. In the current systems, attributes are used as effective parameters of AAA in static form. We want to present that, in order to have an efficient AAA model, we should consider AAA requirements via multilayers security policies. In this paper, a comprehensive approach is represented which defines designing AAA not only for operational and implementation level, but also in the enterprise level. In this regard, the proposed model provides all security requirements for the establishment of appropriate application-level AAA. Some of these requirements must be obtained from regulations and threat modeling, and some of other are calculated by business processes and also operational levels. According to proposed multilayer approach, the evaluation must be considered in several dimensions. So, we’ll evaluate several aspects of the proposed model. The results show that the proposed model covers many security requirements as well. It can also be useful to enhance the information security in integrated applications.

The Dynamics of the Brazilian Current Account with Rule of Thumb Consumers

O modelo intertemporal tradicional da conta corrente assume que todos os indivíduos seguem a teoria da renda permanente. A inovação propostanestetrabalhoéincorporaraomodeloclássicodadinâmicadaconta corrente a ideia de que uma parte dos consumidores apresenta comportamento do tipo rule of thumb. São estimadas a parcela da renda agregada que segue o comportamento rule of thumb e o coeficiente de formação de hábitos. Usando os dados de conta corrente para a economia brasileira,os resultados confirmam alguns fatos estilizados apresentados na literatura assim como algumas proposições básicas testáveis do modelo intertemporal da conta corrente

External adjustment and trading partners’ exchange rate regimes

Large and persistent current account deficits or surpluses have generated a dispute about the effects of exchange rate regimes on current account adjustment. The previous studies focus on the role of a country's regime in correcting its current account imbalances. However, assessing the overall impact of an exchange rate regime requires consideration of the effects of both the home country's regime and its trading partners’ regimes. Thus, this paper estimates the effect of trading partners’ regimes on the speed of the home country's current account adjustment, using a mean-reversion current account model and data of 80 countries from 1980 to 2010. The results show that when a country trades more with countries under non-free-floating regimes, its current account adjustment as a whole becomes slower than under free-floating. The adjustment speed, however, does not increase monotonically with the flexibility of the partners’ regimes. There is also an asymmetry in the adjustment, that is, less flexible regimes decelerate the adjustment of a partner in deficit of the current account. These findings are robust even when using other exchange rate regime classifications or employing different samples.

IS AN INTERTEMPORAL MODEL OF THE CURRENT ACCOUNT VALID FOR EAST ASIAN COUNTRIES? EVIDENCE FROM STRUCTURAL VAR

This paper aims to examine the validity of present-value model of current account (PVMCA) by analyzing dynamic responses of variables in PVMCA to structural shocks. In place of the cross-equation restriction tests used in existing research, we adopted a structural vector autoregression framework and obtain three findings. First, evidences from 4 East Asian countries supported the intertemporal theoretical expectation that country-specific transitory shocks significantly affect current accounts, whereas the effects of global and country-specific permanent shocks are negligible. Second, country-specific transitory shocks that primarily affected current account variance dominate net output variation. Third, global permanent and transitory shocks mainly affecting variances in world interest rates and exchange rates secondarily explain current account variance. Therefore, three explanatory variables of PVMCA sufficiently explain current account variations. In practice, investors can use the PVMCA to forecast changes in current accounts; they further judge business risks stemming from the changes, and adjust their security portfolio.

INTANGIBLE ASSETS AND THE ACCOUNTING REPRESENTATION CRISIS

This theoretical essay aims to promote a reflection on the accounting process’ ability to capture and represent the companies’ economical status through accounting statements. It puts in question the current model of recognition, measurement, and disclosure. This reflection particularly focuses on the intangible assets, which have been widely recognized as the most relevant assets in the current days, yet rarely stated and measured adequately in the accounting statements. This reduces the informational power and the usefulness of such statements. Assuming the likelihood that accounting has been going through a representational crisis, a crisis in which the intangible assets play a crucial role, this essay, consistent with critiques emerging in the financial and capital markets, recommends a wide re-examination of the philosophical and theoretical grounds of the current accounting model. This leads to an issue that seems to be inevitable: the accounting professionals will have to face the challenge of subjectivity and discretion, feared by some, desired by others, but fundamental to everyone. Without subjectivity and discretion, accounting will remain far-off from the company’s economical representation.

Credit growth, current account and financial depth

Exploring the determinants and dynamics of the current account balance is one of the priorities of academic literature and policy circles. Although the effects of structural variables are deeply analysed, a lesser attention has been paid to the impact of financial variables. Drawing on standard empirical current account models and with a large sample of industrial and developing countries, we report a significant deterioration in the current account balance in case of an increase in the credit growth. Moreover, we find that this link is substantially stronger for the developing ones motivating a closer examination. Therefore, we further advance our analysis and show that credit growth causes a stronger impact on the current account balance for lower levels of financial depth. In other words, at the early stages of financial development, acceleration in the credit growth might cause a larger deterioration in the current account balance; thus, it might be suggested that monetary policy and macro-prudential measures aimed at preventing financial excess might be more effective to reduce the external imbalances at the early stages of financial deepening.

Management decisions regarding the voluntary disclosure of information: the problem of the recognition of the firm’s intellectual capital and that of lenders’ information needs

We analyse data on Italian listed companies quoted on the Milan stock exchange which perform R&D (Research & Development) activity. We find there is a positive relationship between R&D activity and voluntary disclosures of additional information that: a) regards R&D assets in themselves, in line with theoretical predictions according to which voluntary disclosure makes up for shortcomings in the current financial accounting model; b) is relevant to lenders’ interests, in line with the fact that quoted Italian firms are highly dependent upon lenders. Owner-managers of quoted Italian firms show, moreover, a significant tendency to augment additional information provided to lenders in the event of losses (negative earnings)

Trade Reforms and Current Account Imbalances

In partial equilibrium, a reduction in import barriers may be thought to lead to an increase in imports and a reduction in trade surplus. However, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified Heckscher-Ohlin structure and an endogenous discount factor into an intertemporal model of current account. We show that trade liberalizations in a developing country would generally lead to capital outflow. In contrast, trade liberalizations in a developed country would result in capital inflow. Thus, efficient trade reforms can contribute to global current account imbalances, but these imbalances do not need policy corrections.

Introducing Valuation Effects-Based External Balance Analysis into the Undergraduate Macroeconomics Curricula: A Simple Framework with Applications

Global imbalances and the sustainability of large U.S. current account deficits have dominated international macroeconomics of late. Pedagogically, a clear disconnect exists between graduate-level open-economy macroeconomics that emphasizes intertemporal current account models and net foreign asset adjustment featuring valuation effects, and, undergraduate macroeconomics that is still driven by static analysis of U.S. current account deficits and cursory coverage of valuation-effects-driven external balance adjustment. The authors of this article discuss a simple intertemporal framework, based on modern open-economy macroeconomic models, that emphasizes the significance of valuation effects arising from changes in asset prices and exchange rates. The authors also highlight the relevance of the framework by examining a few topical applications related to prominent puzzles and debates in open-economy macroeconomics.