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Assessing Current Account Sustainability and its Determinants through a Panel Regression Analysis: The Case of the Philippines and Select ASEAN Economies

Apart from assessing and defining the level and duration at which current account deficit or surplus will be large and persistent enough to be unsustainable, there also must be careful consideration of specific factors determining these external imbalances so appropriate policy response is identified. This paper assesses the sustainability of current account in six ASEAN economies (i.e., the Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam). The Intertemporal Budget Constraint model was adopted to determine a long-run relationship among the variables, exports and imports of goods and services, primary, and secondary income, and panel cointegration and unit root tests to assess the sustainability of the current account. Finally, this research seeks to identify significant macroeconomic determinants of current account through a Panel Dynamic Least Squares (DOLS). Results show that fiscal balance, real GDP growth rate, net foreign assets, and foreign direct investments are significant determinants of current accounts in select ASEAN economies.


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