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The purpose of this paper is to examine the issue of high current account deficit (CAD) from various perspectives focussing its behaviour, financing pattern and sustainability for India.

To begin with the trends, composition and dynamics of CAD for India are analysed. Next, the influence of capital flows on current account is investigated using Granger non-causality test proposed by Toda and Yamamoto (1995) between current account balance (CAB) to GDP ratio and financial account balance to GDP ratio. Also, the sustainability of India’s current account is examined using different econometrics techniques. In particular, Husted’s (1992), Johansen’s cointegration and vector error correction model (VECM) is applied along with conducting unit root and structural break tests wherever applicable. Further, long-run and short-run determinants of the CAB are estimated using Johansen’s VECM.

The study found that the widening of CAD is due to fall in household financial savings and corporate investments. Also, it was found that a large part of India’s CAD has been financed by FDI and portfolio investments which are partly replaced by short-term volatile flows. The unit root and cointegration tests indicate a sustainable current account for India. Further, econometric analysis reveals that India’s current account is driven by fiscal deficit, terms of trade growth, inflation, real deposit rate, trade openness, relative income growth and the age dependency factor.

Since India’s CAD has widened and is expected to widen primarily due to rise in gold and oil imports, policy makers should focus on achieving phenomenal export growth so that a sustainable current account is maintained. Also, with rising working-age and skilled population, India should focus more on high-value product exports rather than low-value manufactured items. Further, on the structural side it is important to correct fiscal deficit as it is one of the important factors contributing to large CAD.

The paper is an important empirical contribution towards explaining India’s CAD over time using latest and comprehensive data and econometric models.

This paper examines global imbalance and rebalancing issues from the viewpoint of Korea. As IMF (2009) notes, the unwinding of global imbalance seems inevitable and, in fact, it is in progress. We illustrate that Korea, with a flexible exchange rate system and relatively balanced current accounts, has little direct linkage to global imbalance. However, we also find that Korea is not immune to the costly adjustment process of imbalance due to the triangular trade between Korea, China and the U.S. The fact that Korea is ‘indirectly’ linked to global imbalance limits Korea’s ability to cope with the situation. Boosting domestic demand, often mentioned recommendation for East Asia, is not an appropriate solution for Korea with low personal savings rate. A lot depends on China’s policy. If China reduces its dependence on U.S. market and increases domestic consumption despite unemployment risk in export manufacturing sector, it will provide Korea with an opportunity for more stable growth based on China’s final demand. Korea can also make efforts to increase economic integration and expand monetary cooperation in Asia that would help to increase consumption demands and final goods trade in the region.

This study aims to identify structural breaks in the current account and the periods between these breaks, which the authors name stability spells, and study their characteristics and determinants.

Using data from the IMF and the World Bank, this study applies the Lee and Strazicich test to endogenously identify breaks and the Heckman selection model to simultaneously study the determinants of structural breaks and current-account changes after breaks.

This study identifies 212 significant structural breaks and 341 stability spells. These spells become shorter and more volatile the further they are from equilibrium, and half of them last 10 years or less. The results show that economic growth and foreign-exchange piling are particularly useful to prevent breaks, while lower per capita income increases exposure to break risks.

This study introduces the concept of current-account stability spells to refer to the periods between structural breaks. These spells are then studied to determine their main characteristics. The authors also apply a global perspective in their analysis, using a wide sample of 181 economies between 1980 and 2018 and considering positive and negative breaks in both level and trend.

This study aims to examine the impact of fiscal deficit, exchange rate and trade openness on current account deficit (CAD). The study tried to empirically investigate the ‘twin deficits hypothesis’ and ‘compensation hypothesis’ in the Indian context.

Autoregressive distributed lagARDL) bound test approach was used by taking annual time series data from 1978 to 2021. The estimates confirm a significant long-run and short-run relationship between dependent variables, i.e. CAD and independent variables such as the fiscal deficit, exchange rate and trade openness.

The results show that positive shocks of all explanatory variables significantly affect the CAD. CAD and fiscal deficit are significantly associated, as the coefficient of fiscal deficit is positive and significant. The study also found that exchange rate and trade openness significantly affect the CAD. The coefficients of exchange rate and trade openness are positive and significant. The findings show that an increase in CADs results from liberal trade policies that help domestic industries grow their trade and expansionary fiscal policy, leading to a higher fiscal deficit. The negative and significant error correction term suggests that short-run disequilibrium converges to long-run equilibrium at a speed of 19.2%. The findings validate the ‘twin deficits hypothesis’ and ‘compensation hypothesis’ in the Indian context.

It can be inferred from the study that liberal policy to promote economic growth and trade openness should be designed and promoted judiciously. An excessive liberalised approach may impact other macroeconomic variables such as current account balances. Integrating the domestic market with global markets poses a big challenge for countries like India that aspire to penetrate global markets. Furthermore, the Indian policy makers should rigorously work and promote the policies such as Fiscal Responsibility and Budget Management (FRBM) as reduction in fiscal deficits, trade imbalances will also be reduced.

This study contributes to the existing literature on ‘twin deficit’ and trade openness by giving new evidence on the trilemma between designing sustainable fiscal policy by spending wisely without imperilling the country's global presence and CAD.

This study investigates the dynamic causality linkages between fiscal deficits and selected macroeconomic indicators in a panel of five East African Community countries.

The research design is based on panel cointegration tests, panel cross-section dependence tests, panel error correction-based Granger causality tests and panel impulse response functions.

Results show that there is long-run feedback causality among fiscal deficits and each of the variables include gross domestic product (GDP) growth, current account balance, interest rates, inflation, grants and debt service. Short-run Granger causality dynamics indicate that there is feedback causality between fiscal deficits and GDP growth; no causality between fiscal deficits and inflation; no causality between fiscal deficits and current account; no causality between fiscal deficits and interest rates; feedback causality between fiscal deficits and grants; and no causality between fiscal deficits and debt service. Impulse response functions show positive and significant impacts of current account balance, inflation and grants; negative and significant impacts of real GDP growth and lending rates; and insignificant effects of debt service.

While the study examines the dynamic causality between fiscal deficits and selected macroeconomic indicators in the East African Community, the analysis excludes South Sudan due to significant data limitations.

In light of the East African Community's aspirations to achieve convergence on key macroeconomic targets, including the fiscal deficit, this research provides novel insights on fiscal policy determinants and causality dynamics.

The dynamic relationships between fiscal policy and macroeconomic variables may have social implications for welfare, equitable growth and distribution of resources.

With a focus on the East African Community, this paper contributes to the literature on the macroeconomic determinants of fiscal deficits in regional economic communities.

The aim of this paper is to make a descriptive exploratory effort to discern the role of IT exports in India's macro-economic indicators, like national income, employment and balance of payment in the post-Liberalization, Privatization and Globalization strategy in the 1990s. The paper also explores the vital historical developments of various dimensions of IT, such as its export growth, major software and services exports destinations, compositions of IT exports and domestic growth in India.

This study is based on secondary data, which were collected from Balance of Payment Statistics Reserve Bank of India (RBI) and Handbook of Statistics on Indian Economy, National Association of Software and Service Companies (NASSCOM),rtd and Department of Electronics and Information Technology (DEITY). This study has used descriptive analysis and growth models for studying the objectives. Major IT sector dimensions, such as total output, exports revenue, domestic revenue, gross domestic product, employment and exports of the software and service industry, have been examined for the period 1991–2016.

The findings suggest that over the last 26 years, the information technology industry's economic footprint has extended by more than seven times. Over the same period, direct employment in the information technology sector increased at an average growth rate of around 17%. Software and services exports earn, on average, about three times greater than the other three major services of India's current account of the balance of payment.

This study focuses on originality in examining the role of IT exports in India's macro-economic indicators economic reforms of the 1990s and also explores the historical developments of various dimensions of IT exports and domestic growth in India. All the work has been done in original by the authors, and the work used has been acknowledged properly.

The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective.

The authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components.

The authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy.

Given the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices.

This paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.

The impact of financial reforms and financial development on an economy has received considerable attention over the recent past. This paper aims to investigate whether financial liberalisation and financial development increase the likelihood financial crises in Southern African development community (SADC) countries.

Due to the binary nature of the dependent variable, the logit model is used for the analysis using data for the period 1990 to 2015.

The results showed that financial liberalisation captured by real interest rates reduces the likelihood of financial crises. Furthermore, regulatory quality strengthens this reductive effect of financial liberalisation on the probability of financial crises. On the other hand, financial development represented by bank credit increases the incidence of financial crises. The results also suggest that financial liberalisation may increase the likelihood of financial crises indirectly through financial development.

The study recommends that a sound regulatory and supervisory framework be established as well as institutional quality raised to curb the effect of financial development on the incidence of financial crises.

There is scant evidence on the role that financial liberalisation and financial development play in the incidence of financial crises in the SADC. This study incorporates the effect of institutional quality in the analysis which has been neglected by most studies on financial reforms in SADC countries. A number of recent studies in SADC countries conclude that financial development resulting from financial reforms, may hinder economic growth. Therefore, this study sheds light on this negative relationship.

The purpose of this research is to study the relationship between exchange rate fluctuations and stock market returns of the seven highest economic performing emerging countries (E7).

The study is conducted using the daily data for exchange rates and stock market returns in each of the E7 countries from January 1, 2019, to January 1, 2022. The study employs the ordinary least squares, autoregressive distributed lag error correction regression and generalized autoregressive conditional heteroskedasticity (GARCH (1,1)) regression models to fully investigate the impact of exchange rate on stock markets. For further investigation, the GARCH (1,1) model is run twice for each country with and without the inclusion of exchange rate to determine its effect on the volatility of stock returns.

The findings support the presence of cointegration relationship between the variables for all countries. The results reveal significant positive long-run relationship between exchange rates and stock market returns in all countries except for Indonesia, which evidenced a significant negative impact. The results of the GARCH (1,1) add that the inclusion of exchange rate in the model accounts for a slight change in the volatility of stock returns.

The research provides empirical evidence that appreciating currencies are perceived positively by investors leading to better performing capital markets. The outcomes of this study may assist policy makers in understanding to what degree changes in exchange rates can influence capital markets, as well as narrow the gap in literature regarding which theory is more relevant in explaining how exchange rate fluctuations impact market values.