Essays in international macroeconomics

Abstract

This dissertation is a collection of three separate essays in the area of international macroeconomics. How does the history of a variable matter for its current state? Do current account reversals affect the persistence of international capital flows? These questions, relevant in policy circles for the analysis of the trajectory and the timing of adjustment of external imbalances, are the motivators of the second chapter titled "How persistent are international capital flows?" . In this chapter we document the dynamic properties of the current account, trade balance and international capital flows. For this purpose, three different approaches are taken: probit, non-parametric estimation and an asymmetric autoregression. The probabilistic approach shows that, in general, deficits and net inflows tend to be more persistent than surpluses and net outflows. This result is robust to either specification of pooled and country-specific probits. Current account reversals have a significant effect on the persistence of capital flows, especially in developing countries. The latter also have more persistent deficits and net inflows than industrial countries. The results of non-parametric estimation are in line with the results obtained from the probit. In the case of asymmetric autoregression, we find that surpluses are more persistent than deficits: although the probability of remaining in surplus is lower, the scale of surpluses tends to show more persistence from the scale of deficits.