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Nonlinearities in international macroeconomics : an empirical analysis of advanced economies and emerging markets
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Goretti, Manuela (2007) Nonlinearities in international macroeconomics : an empirical analysis of advanced economies and emerging markets. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b2172354~S1
Abstract
The empirical literature in international macroeconomics and finance reveals
a growing interest in the use of nonlinear models. Their attractiveness is clear,
as these models allow capturing discontinuity in the data-generating process and,
by estimating endogenously transition probabilities and variables, avoid the a priori
identification of regimes and their timing, thereby enhancing the extent of flexibility
in the analysis. This thesis makes use of nonlinear techniques in order to model two
different economic issues, which have been at the centre of the economic debate in
the last years.
The first analysis refers to the issue of debt sustainability and, in particular,
tries to test empirically some of the leading interpretations that have been advanced
to account for the financial turmoil that characterised the run-up to the Brazilian
presidential elections in 2002. We test for financial contagion from the Argentine
crisis and the impact of factors including IMF intervention and political uncertainty
in raising the probability of crisis. The empirical investigation employs a Markovswitching
model with endogenous transition probabilities.
The second part of the thesis is devoted to the analysis of current account
imbalances in G7 countries. We find evidence of threshold behaviour in current
account adjustment, such that the dynamics of adjustment towards equilibrium depend
upon whether the current-account/ net-output ratio breaches estimated country
specific current account surplus or deficit thresholds. Both the speeds of adjustment
and the size of the thresholds are found to differ significantly across countries. We
complement the univariate analysis by disentangling the domestic components of
the current account according to the national income identity with a view to shed
light on the role of savings (both public and private) and investment. Evidence of
shifts in means and variances of exchange rate changes - that coincide with the current
account adjustment regimes identified by the model - suggest scope for further
research on the role of the real exchange rate in determining the nonlinear behaviour
of the current account. We extend the threshold methodology to a bivariate
context and find evidence of a strict link between current account adjustments and
deviations of a country real exchange rate from its long run equilibrium, such that
beyond a certain appreciation/depreciation of the real exchange rate, a country CA
imbalance would start reverting towards its mean value. Finally, we run a nonlinear
test of the present value model of the current account, encouraged by the evidence
of nonlinear adjustment in the current account. However, in line with the literature,
we reject the test for all countries also in this new nonlinear framework.
Item Type: | Thesis (PhD) | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce |
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Library of Congress Subject Headings (LCSH): | Macroeconomics, Nonlinear systems, International economic relations -- Econometric models, Group of Seven countries -- Economic policy, Brazil -- Economic conditions -- 21st century, Argentina -- Economic conditions -- 21st century, Foreign exchange rates -- Econometric models | ||||
Official Date: | February 2007 | ||||
Dates: |
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Institution: | University of Warwick | ||||
Theses Department: | Department of Economics | ||||
Thesis Type: | PhD | ||||
Publication Status: | Unpublished | ||||
Supervisor(s)/Advisor: | Taylor, Mark P., 1958- ; Miller, Marcus, 1941- | ||||
Extent: | x, 157 leaves | ||||
Language: | eng |
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