The impact of financial (de)regulation on current account balances

Tanto los desequilibrios mundiales como la (des)regulación de los mercados fi nancieros destacan como posibles causas de la crisis fi nanciera mundial. En este documento se investiga la posible relación entre ambos fenómenosconcretamente, analizamos la relación entra la (des)regulación de los mercados fi nancieros y los saldos por cuenta corriente, un área para la que la evidencia empírica disponible es escasa. A tal fi n, explotamos datos para un panel de países en el período 1980-2010 y empleamos un novedoso enfoque empírico que permite atajar simultáneamente la incertidumbre del modelo, la persistencia en los saldos por cuenta corriente y la heterogeneidad no observada a nivel de país. Encontramos evidencias empíricas concluyentes de que las (des)regulaciones de los mercados fi nancieros afectan a los saldos por cuenta corriente y que los diferentes aspectos de estas regulaciones pueden tener efectos opuestos sobre la cuenta corriente. En particular, observamos que reducir las barreras de entrada en el mercado bancario se asocia negativamente con la balanza por cuenta corriente. Por el contrario, la privatización bancaria y la desregulación del mercado de valores tienden a elevar los saldos por cuenta corriente. Nuestros resultados también ponen de relieve la importancia de tener en cuenta la persistencia y la heterogeneidad no observada a nivel de país. Una vez ambos factores son tenidos en cuenta, hallamos evidencias sólidas para una amplia gama de factores que están asociados con la evolución de la cuenta corriente, en contraste con estudios anterioresGlobal imbalances and fi nancial market (de)regulation both feature prominently among the potential causes of the global fi nancial crisis, but they have been generally discussed separately. In this paper, we take a different angle and investigate the relationship between fi nancial market regulation and current account balances, an area for which there is limited empirical evidence. We use a panel of countries over the period 1980-2010 and employ a novel empirical approach which allows us to simultaneously account for model uncertainty, current account persistence and unobserved heterogeneity. We fi nd robust evidence that fi nancial market regulations affect current account balances and that different aspects of these regulations can have opposing effects on the current account. In particular we fi nd that lowering bank entry barriers is negatively associated with the current account balance. In contrast, bank privatisation and securities market deregulation tend to raise current account balances. Our results also highlight the need to control for persistence and unobserved heterogeneity. Once we control for these factors, we fi nd robust evidence for a wide range of current account theories in contrast to previous studie

Midwest Macro Conference

Abstract This paper takes a fresh look into Africa's growth experience by using the Bayesian Model Averaging (BMA) methodology. BMA enables us to consider a large number of potential explanatory variables and sort out which of these variable can e¤ectively explain Africa's growth experience. Posterior coe¢ cient estimates reveal that key engines of growth in Africa are substantially di¤erent from those in the rest of the world. More precisely, it is shown that mining, primary exports and initial primary education exerted di¤erential e¤ect on African growth. These results are examined in relation to the existing literature. JEL Classi…cation: O40, O47. Keywords: Africa, growth determinants, model uncertainty, Bayesian Model Averaging (BMA). We thank the editor Steven Durlauf and an anonymous referee for valuable comments and suggestions. We also thank seminar participants a

Unravelling the Fortunes of the Fortunate: An Iterative Bayesian Model Averaging (IBMA) Approach

We investigate country heterogeneity in cross-country growth regressions. In contrast to the previous literature that focuses on low-income countries, this study also highlights growth determinants in high-income (OECD) countries. We introduce Iterative Bayesian Model Averaging (IBMA) to address not only potential parameter heterogeneity, but also the model uncertainty inherent in growth regressions. IBMA is essential to our estimation because the simultaneous consideration of model uncertainty and parameter heterogeneity in standard growth regressions increases the number of candidate regressors beyond the processing capacity of ordinary BMA algorithms. Our analysis generates three results that strongly support different dimensions of parameter heterogeneity. First, while a large number of regressors can be identified as growth determinants in Non-OECD countries, the same regressors are irrelevant for OECD countries. Second, Non-OECD countries and the global sample feature only a handful of common growth determinants. Third, and most devastatingly, the long list of variables included in popular cross-country datasets does not contain regressors that begin to satisfactorily characterize the basi