Abstract:
This paper examines the current account dynamics in a group of ten
newly industrialized countries (NICs) during the period 1980–2012
using a panel error-correction model. The model is also used to
empirically test whether the degree of capital mobility is positively
related to financial openness. The Chin-Ito (2006, 2008) financial
openness index is used to classify the countries into different
groups, and we place the countries in one group that are similar
to each other in terms of their financial openness. Furthermore, to
evaluate the extent of capital mobility over the different period from
1980 to 2012, the total period under study is divided into three subperiods. The estimation results indicate that there exist long-run
equilibrium relationships between domestic saving, investment, and
current account in all groups regardless of their degree of financial
openness. We find that more openness in terms of the capital account
is associated with a higher degree of capital mobility in the case of
NICs. The empirical result also indicates that the degree of capital
mobility is higher in the first and third sub-period.
