BARONE SERGIO VICTOR
Congresos y reuniones científicas
Título:
Probability of Current Account Reversals in Argentina and other Latin American Countries
Lugar:
Montevideo, Uruguay
Reunión:
Congreso; XXIII JORNADAS ANUALES DE ECONOMÍA Banco Central del Uruguay; 2008
Resumen:
The cumulative effect of selected shocks on the probability of a Current Account Reversal is measured as a quantification of the external vulnerability of Latin American economies. In the framework of the intertemporal approach the explanation of reversals in the LACs is focused on external solvency as the restrictive determinant of the threshold of overborrowing –in contrast with perspectives stressing fiscal solvency-. Following the empirical strategy suggested by Milesi- Ferreti and Razin and others, a random effects probit panel model is run to find the probability of occurrence of CARs in LA countries. Relevant variables are GDP growth, changes in terms of trade and contagion. A statistical model is used to build a case of a representative LAC: simulations with estimated coefficients suggests that the presence of low growth and contagion may be absorbed by the economy when these factors operate individually, but their simultaneous occurrence drive the probability of reversals rapidly up above 40%. A policy implication is that solvency may vanish rapidly, out of control of domestic authorities, and that the limit of overborrowing is uncertain. Orders of magnitudes for safe scenarios may be quantitatively established providing a guide for limits in external indebtedness