Global Imbalances in Current Account Balances

Persistent current account deficits were observed in some developing countries that are received substantial foreign capital in the last decades. This has raised the issue of sustainability and increased the volume of studies about the measures of sustainable current account deficits in the economic literature. Researchers especially concentrated on the issue that whether the deficits result with a balance of payments crisis or not. In this paper, we use Markov Switching Auto Regressive models with three regimes in 1975–2009 periods annually for analyzing the current account balances of some developing countries; Argentina, Brazil, Mexico and Turkey. Since oil exports (or imports) constitute large amounts in trade balances of these countries and current account balances represent persistency in their nature, we have used oil prices together with the current account balances itself in order to explain the structure of the current account balance levels of these countries. Results indicate that behavior of the current account balances differs in response to a being an oil exporter or importer which highlights the structural part of the current account balances.