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Economics and business journals focus on publishing papers coming from the fields of applied economics, corporate finance, financial investments, markets, institutions, industrial organization, international trade, marketing and similar.
Business and Economics
Abstract
The paper decomposes the real and nominal exchange rate volatility using the component GARCH specification to examine their impact on foreign direct investment (FDI) in 23 transition economies at aggregated and disaggregated levels. The paper employs instrumental variables within the SYS-GMM estimation procedure to provide the results' reliability and consistency. According to the results, the impact of long-run real exchange rate volatility on FDI differs among economic activities. These findings may be explained by the fact that the key motives of foreign investors entering the manufacturing sector will likely differ from those of foreign investors entering the financial intermediation or transport and communication sector. On the other hand, the short-run real exchange rate volatility and the long- and short-run nominal exchange rate volatility are not significant determinants of FDI in the transition economies covering the period from 2000 to 2023.
Abstract
We propose a novel probability approach to examine the sustainability of the current account balance by generating density forecasts and calculating the probability that the current account balance will be lower than a specified threshold. We define a current account as sustainable by having a low probability of the current account deficit exploding. We use a vector autoregressive model to generate density forecasts up to five years ahead. We apply the method to ten countries that had high current account deficits in the past and find cases with both high and low probability of sustainability. We analyse historical episodes to illustrate the predictive capability of our framework and find that our method would have worked well in the past. We further find that the sustainability risk does not relate to whether the government or the private sector is the main driver of the deficit.
