A Study on the Effect of Share Price Shocks on the Current Account Fluctuations
DOI:
https://doi.org/10.22105/tqfb.v1i1.30Keywords:
Fluctuations of the current account, Share price, VAR panel, Monetary policy, Exchange rate, ShockAbstract
When the economy encounters sudden foreign shocks, the current account is regarded as an important political priority. This paper has studied the effect of share price shocks on the current account in the member states of ECO from 2008-2012. It has tried to answer how the share price shocks affect fluctuations of the current account in the member states of ECO by using scientific methods. By using the Value at Risk (VaR) approach, the results obtained for the current account fluctuations variable revealed that share price, the ratio of the current account balance to GDP, and the nominal interest rate have the greatest effects on this variable. Furthermore, the least explanatory power in the current account fluctuations pertains to GDP and consumer price variables.
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