| Abstract: | In this study, we utilize the growth rate of gross domestic product as the threshold variable to construct two nonlinear threshold vector autoregression models to re-examine the findings in Yan (2007 Yan, Ho-Don. 2007. Does Capital Mobility Finance or Cause a Current Account Imbalance?. Quarterly Review of Economics and Finance, 47(1): 1–25. Crossref] , Google Scholar]:23) that “current account imbalance causes capital mobility in developed countries; capital mobility causes current account imbalance in emerging countries.” The nonlinear causality test shows that the findings of Yan (2007 Yan, Ho-Don. 2007. Does Capital Mobility Finance or Cause a Current Account Imbalance?. Quarterly Review of Economics and Finance, 47(1): 1–25. Crossref] , Google Scholar]) can exist only in certain regimes and the primary factor that affects the causality between current account and financial account (and its components of foreign direct investment, portfolio investment, and other investment) is the asymmetry caused by the business cycle. |
