Title: External imbalances and economic growth across countries: A non-parametric reassessment
Authors: Mariam Camarero - University Jaume I (Spain) [presenting]
Cecilio Tamarit - University of Valencia (Spain)
Jesus Peiro-Palomino - University Jaume I (Spain)
Abstract: The role played by imbalanced net foreign asset (NFA) positions on growth is assessed. This topic is in the spotlight in recent years in both the theoretical and the empirical spheres. The literature, however, is still inconclusive, inviting authors to depart from one-size-fits-all prescriptions and to adopt flexible approaches allowing for parameter heterogeneity. We revisit the external imbalances-growth nexus by running non-parametric kernel regressions for a wide sample of countries and for the period 1983-2011, controlling also for well-established growth determinants and providing results robust to endogeneity. The main results suggest a preponderant positive relationship between NFA and growth, although the impact varies across countries and over time. In particular, it is affected by country-specific factors such as the depth of financial development and the quality of formal institutions. However, the intensity of the causal relationship is not statistically different for debtor and creditor countries, or for fast and slow growing countries.