TESTING THE IMPLICATIONS OF THE INTERTEMPORAL CURRENT ACCOUNT MODEL FOR BRAZIL: 1947- 2010

Abstract

According to the intertemporal approach, one of the most important ways to describe the dynamics of international capital is the current account. This paper applies to Brazilian data econometric technique developed by Campbell (1987) and Campbell and Shiller (1987) to test the intertemporal current account model for the period 1947 to 2010. It compares the results obtained in this work with others presented to the Brazilian economy in order to establish the robustness of the model for different periods. The results confirm some stylized facts presented in the literature and show that not all basic propositions testable of the intertemporal current account model were confirmed. However, a less formal analysis suggests a high degree of capital mobility and significant inflows of speculative capital, because the optimal series of the current account was less volatile than the observed series in the period.