2012年-IMF国际货币组织全球_Financial_Regulation_and_the_Current_Account_51页_1mb

Summary of "Financial Regulation and the Current Account"

Core Content

This working paper explores the relationship between financial regulation and the current account, focusing on how liquidity constraints imposed by financial regulation influence the response of the current account to net output shocks. The authors propose a theoretical and empirical framework to examine this relationship using an intertemporal model of the current account and an interacted panel VAR model.

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Main Views and Key Findings

Theoretical Framework

• The paper builds on the Sachs (1981) intertemporal current account model (ICA), which is extended to incorporate financial regulation as a liquidity constraint.
• Financial regulation affects the savings and borrowing behavior of households, thereby influencing the current account balance.
• The model assumes two types of households:
  • Non-Ricardian households that are liquidity constrained and cannot smooth consumption across time.
  • Ricardian households that can borrow and save internationally and are assumed to have habit formation in consumption.
• The current account reaction function is derived under different assumptions:
  • External habit formation (consumption depends on average past consumption in the economy).
  • Internal habit formation (consumption depends on past consumption of the individual).
  • Stochastic time-varying world real interest rate.
• The paper shows that the current account response to net output shocks is larger and more persistent in countries with lower financial regulation (i.e., more liquidity-constrained households).

Empirical Analysis

• The interacted panel VAR model is used to test the theoretical predictions, allowing the VAR coefficients to vary with the degree of financial regulation and capital account openness.
• The data spans 84 countries from 1973 to 2005, using de jure financial regulation indices from Abiad, Detragiache, and Tressel (2010).
• The empirical results show:
  • A net output shock leads to a larger current account reaction in low-regulation countries compared to high-regulation ones.
  • The current account response is approximately 60% larger and more persistent in countries with low financial regulation.
  • The effect is robust across different modeling assumptions and sign restrictions.
• The impulse response functions (see figures 4–6) confirm the theoretical predictions, showing that financial deregulation increases the size and persistence of current account imbalances.

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Key Information

• Financial regulation is modeled as a liquidity constraint, limiting access to saving and borrowing.
• Net output shocks have a greater impact on the current account in less regulated economies.
• Empirical evidence supports the idea that financial deregulation leads to higher current account imbalances and greater persistence.
• The paper introduces a new sign restriction methodology to identify net output shocks in the presence of liquidity constraints.
• The results suggest that tightening financial regulation globally could significantly reduce current account imbalances.
• The theoretical model is robust to various assumptions, including external and internal habit formation, and stochastic interest rates.

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Structure of the Paper

1. Introduction

   • Highlights the role of financial regulation in shaping current account imbalances.
   • Notes the excess elasticity hypothesis and the importance of liquidity constraints.

2. Theory

   • Explains how financial regulation affects the current account response to net output shocks.
   • Derives theoretical identification restrictions and reaction functions under different assumptions (external habits, internal habits, stochastic interest rates).

3. Empirical Methodology and Data

   • Uses a panel VAR approach with time and fixed effects.
   • Incorporates financial regulation and capital account openness as exogenous variables.
   • Applies sign restrictions to identify net output shocks.

4. Empirical Results

   • Confirms that the current account response is larger and more persistent in low-regulation countries.
   • Shows that financial deregulation is associated with greater current account imbalances.
   • Conducts robustness checks using different model specifications and control variables (e.g., exchange rate regimes).

5. Conclusion

   • Emphasizes the importance of financial regulation in shaping current account dynamics.
   • Suggests that financial reform could have significant implications for international monetary stability.

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Methodological Contributions

• Provides first empirical evidence linking financial regulation to current account responses.
• Applies sign restriction methodology to identify net output shocks in the presence of liquidity constraints.
• Examines the role of liquidity constraints in different versions of the intertemporal model.
• Uses panel data across 84 countries to test the theory in a global context.

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References and Appendices

• The appendix provides detailed derivations of the current account reaction functions under different assumptions.
• The empirical methodology is supported by sign restrictions (see Table 1).
• The results are visualized using impulse response functions (see Figures 4–12).
• The data includes financial regulation indices and current account imbalances.

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Implications

• Financial regulation plays a crucial role in determining current account behavior.
• Liquidity constraints are a key mechanism through which financial regulation affects the current account.
• Empirical results suggest that financial deregulation increases the size and persistence of current account imbalances.
• The paper contributes to the understanding of global current account imbalances and the role of financial systems in macroeconomic stability.