Niloufer Sohrabji

Bio: Niloufer Sohrabji is an academic researcher from Simmons College. The author has contributed to research in topics: Current account & Solvency. The author has an hindex of 7, co-authored 19 publications receiving 122 citations.

On the optimality and sustainability of Turkey's current account

Abstract: We analyze Turkey’s current account optimality and sustainability between 1992 and 2004. Using the intertemporal benchmark model for Turkey’s current account we test for its intertemporal solvency. Based on traditional and alternative tests (which account for persistence in the current account), we conclude that Turkey breached the intertemporal solvency condition in the sample period. In addition, stationarity tests of the deviation between actual and optimal net external liabilities series confirm that Turkey’s current account deficit was unsustainable for that period. However, further econometric investigation and analysis of reforms causes us to question our conclusions of non-optimality and unsustainability of the Turkish current account for the latter part of the period.

Elasticities of Turkish Exports and Imports

Abstract: The Turkish current account has been exploding in the last few years leading to concerns of a crisis One of the primary factors identified in the rising deficits is the appreciating lira In addition, income elasticity of exports and imports can also shed light on continuing trade deficits In this paper we analyze exchange rate and income elasticity of Turkish imports and exports We find a significant gap between domestic and foreign income elasticities (for exports and imports respectively) which points to a threat of growing trade deficits In addition we also find that the exchange rate elasticity is negative for both Turkish exports and imports This indicates that depreciation of the Turkish lira will have a negative effect on both imports and exports

Intertemporal Solvency of Turkey's Current Account

Abstract: We test for sustainability of Turkey’s current account position between 1987 and 2009 using the intertemporal solvency model of Craig S. Hakkio and Mark Rush (1991) and Steven Husted (1992). According to this approach, the intertemporal budget constraint is satisfied if there is cointegration between exports and imports+ (which include imports, net interest income and unilateral transfer payments). We test for, and find evidence of, cointegration using the standard Johansen test as well as the Allan W. Gregory and Bruce Hansen (1996) test. The latter allows for a structural break in the cointegrating relation. Further, dynamic GLS estimation shows a statistically significant relation between exports and imports+, although, we reject strong current account sustainability. Our evidence suggests that Turkey remains vulnerable to reversals in capital flows, but we believe this vulnerability will diminish as the service component of trade increases.

Analyzing the Sustainability of India's Current Account Position Following the Reforms of the Early 1990s

Abstract: Following the 1991 crisis, India undertook reforms that liberalized trade and investment. India faced current account deficits for most of the period following these reforms. This paper analyzes sustainability of India's current account position over the last decade using the intertemporal solvency model of Hakkio and Rush and Husted. In this theoretical framework, the intertemporal solvency constraint is satisfied if there is cointegration between inflows and outflows of the current account. This paper finds cointegration between the series when allowing for a structural break using the Gregory and Hansen procedure. Dynamic generalized least squares (GLS) estimation shows a strong relation between India's current account inflows and outflows. On the basis of the empirical results, this paper concludes that there has been an improvement in trade patterns and despite experiencing deficits, India's current account position is sustainable.

Analyzing The Present Sustainability Of Turkey's Current Account Position ∗

Abstract: I. INTRODUCTION Although Turkey has suffered from earlier current account deficits, the current account position has worsened considerably since 2004. With current account deficits breaching the conventional threshold of 5% of GDP in the last few years, there has been a great deal of debate regarding the sustainability of Turkey’s current account position and the possibility of a crisis. The primary cause for concern is that the two major crises that Turkey faced in 1994 and 2001 were preceded by high current account deficits. The current account deficits facing Turkey since 2004 are more severe than those in previous periods, yet Turkey has been able to avoid a crisis. This is because a high current account deficit alone does not necessarily imply an unsustainable external position and thus may not necessarily result in a crisis. Rather, there are a whole host of factors that impact external sustainability. This paper examines the factors that allowed Turkey to avoid a crisis from 2005 to 2007 despite having such large current account deficits and explores the sustainability of the current account position in the coming years. A comprehensive framework for examining current account sustainability is provided by Milesi-Ferretti and Razin (1996). This framework is based

Sustainability of Persistent Current Account Deficits

Abstract: This paper puts forward a notion of current account sustainability that explicitly takes into account willingness to pay and willingness to lend in addition to intertemporal solvency. It argues that this notion of sustainability provides a better framework for understanding the variety of country experiences with protracted current account imbalances. Based on this notion, we identify a number of operational indicators related to the structure of the economy, the economic policy stance, and political economy factors. We use these sustainability indicators to evaluate the experience of a number of countries that ran persistent current account imbalances, and derive policy implications consistent with our notion of sustainability.

Differences in monetary policy transmission? A case not closed

Abstract: The advent of EMU inspired a large literature searching for differences in the monetary policy transmission among European countries. Stylised facts seemed to arise, classifying the countries as having either rapid or slow transmission. Our paper takes a comprehensive look at the existing empirical results, and finds few recurrent features supporting the presumed stylised facts. The econometric part examines the difficulties of meaningful identification of a monetary shock. The paper proposes a general approach to reducing the identification space through economic restrictions. We conclude that uncertainties in macro-econometric analysis are too large to allow establishing any statistically significant differences.

A pre-crisis vs. crisis analysis of peripheral EU stock markets by means of wavelet transform and a nonlinear causality test

Abstract: This paper presents an analysis of EU peripheral (so-called PIIGS) stock market indices and the S&P Europe 350 index (SPEURO), as a European benchmark market, over the pre-crisis (2004–2007) and crisis (2008–2011) periods. We computed a rolling-window wavelet correlation for the market returns and applied a non-linear Granger causality test to the wavelet decomposition coefficients of these stock market returns. Our results show that the correlation is stronger for the crisis than for the pre-crisis period. The stock market indices from Portugal, Italy and Spain were more interconnected among themselves during the crisis than with the SPEURO. The stock market from Portugal is the most sensitive and vulnerable PIIGS member, whereas the stock market from Greece tends to move away from the European benchmark market since the 2008 financial crisis till 2011. The non-linear causality test indicates that in the first three wavelet scales (intraweek, weekly and fortnightly) the number of uni-directional and bi-directional causalities is greater during the crisis than in the pre-crisis period, because of financial contagion. Furthermore, the causality analysis shows that the direction of the Granger cause–effect for the pre-crisis and crisis periods is not invariant in the considered time-scales, and that the causality directions among the studied stock markets do not seem to have a preferential direction. These results are relevant to better understand the behaviour of vulnerable stock markets, especially for investors and policymakers.