Search

This paper provides an overall picture on the influence of domestic and foreign shockson the current account of selected Asian countries over the period 1978 to 2012. Thepresent value model of the current account theory states that forward looking andconsumption smoothing behaviour of economic agents can promote sustainablecurrent account balances, as long as these are maintained by transitory unanticipatedshocks to the current account. The unexpected transitory domestic and foreign shocksare sourced, respectively, from the domestic and foreign current account. Foreignshocks are developed from an Asian country, a region, and the US. Our empiricalanalysis of the impact of foreign and domestic current account shocks shows thatunexpected domestic shocks, rather than unexpected foreign shocks, matter for thecurrent accounts of Asian countries.

This paper empirically tests the dynamics of credit cards and monetary policy in thecontext of Indonesia. Using monthly data from 2006 to 2018 and a structural vectorautoregressive model, our findings indicate that credit card usage is mainly drivenby Indonesia’s fast economic growth over the last decade, which indeed reflects therole of credit cards in consumption smoothing. The study also finds that monetarypolicy transmission through the lending channel is weak, with a more prevalent rolefor exchange rates and global oil prices in the transmission process.