Evolution of Bolivia’s Current Account Trajectory 1990-2024

Abstract

This thesis assesses the evolution of Bolivia’s Current Account dynamics from 1990 to 2024 within the Trehan and Walsh (1991) and Husted (1992) stationarity and cointegration frameworks. Using quarterly data from 1990 to 2024 and applying break-robust methods, including Bai–Perron, Zivot-Andrews, ADF, KPSS, Johansen, and Gregory-Hansen tests, the analysis proposes three distinct external adjustment regimes aligned with major policy and commodity shocks. During the liberalization and crawling-peg era (1990–2003), the Current Account exhibits mean-reversion around a deficit and strong export–import cointegration, suggesting disciplined external adjustment. The gas-boom phase (2003–2014) produces record surpluses, but the underlying trade dynamics weaken, and the long-run link between exports and imports deteriorates once structural breaks are accounted for. Under the post-2014 hard peg, results suggest increasing external fragility as the Current Account loses mean-reversion properties, and trade flow cointegration collapses. These findings reveal that treating the full period as a single process would mask the transition from adjustment to vulnerability. Policy implications emphasize restoring exchange-rate flexibility, promoting export diversification, and rebuilding reserves to strengthen Bolivia’s external position