Long-run International Relationship of Current Accounts amongst Taiwan, Japan and Korea

• Main Authors: Wu-Fong Lee, 李武峰
• Other Authors: Ming-Jang Weng
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/2ydve4

碩士 === 國立暨南國際大學 === 經濟學系 === 90 === This paper is based on the viewpoint of the intertemporal substitution of the consumption smoothing. Under considering the interaction of the international economy, we employ the present value method of the current account to predict and investigate the current accounts amongst Taiwan, Japan and Korea. In view of the traditional intertemporal current account model, and whose common characteristics that are based on the single country's economic variables themselves as the model forecasting, it lacks of considering the interaction amongst countries. However, in the tendency of economic liberation and with the increasing degree of regional economic integration, except for those closed-economy countries or nations that lack of international trades, the international interactions are intimate, and their economic dynamics should correlate with each other. Therefore, we modify the traditional single-country VAR estimation of the present value models to a cross-country VAR estimation to capture not only the inter-national but those intra-national relationships also. In this paper, we use the empirical data of Taiwan, Japan and Korea over the past two decades to investigate the Granger causalities between national cash flows and current accounts within each country, and amongst countries as well, to see if international macroeconomic policy negotiation/cooperation in the region is necessary or not. According to our empirical findings and under consumption-smoothing point of view, the cross-country VAR estimation of the current accounts do outperform the traditional single-country VAR models in forecasting the actual current accounts for Taiwan, Japan and Korea. Especially for the case of Japan, the sum of foreign expected future changes of national cash flow explains 98.5% of dynamic behavior of Japan's current account, and leaves only 1.5% of explanation for the sake of its domestic expected future changes of national cash flow. Similar conclusions can also be applied to Taiwan and Korea. It implies that one's current account is not affected by her own economic performance only, but others as well, and even more. This allows us to infer that one should also take into account the other countries' economic developments when making her macroeconomic and international trade policies.