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Limited empirical work has been done to the diverging current account balances of the individual emerging Asian economies. Based on the intertemporal approach to current account, this paper empirically examines both the long-run and short-run impacts of initial stock of net foreign assets, degree of openness to international trade, real exchange rate and relative income on current account balances for eight selected emerging Asian economies over the period 1980-2009, making use of the cointegrated VAR (Vector Autoregression) methodology. This paper finds that current account behaviours in emerging Asian economies are heterogeneous. Initial stock of net foreign assets and degree of openness to international trade are important factors in explaining the long-run behaviour of current accounts. Moreover, the current accounts of all sample economies have a self-adjusting mechanism except China. Short-run current account adjustment towards long-run equilibrium path is gradual, with the disequilibrium term being the main determinant of the short-run current account variations.

This thesis addresses three issues in international macroeconomics. Chapter 2 provides an empirical investigation of both the short- and long-term determinants of current accounts for the eight largest emerging Asian economies. The analysis is carried out within a cointegrated VAR framework. In this chapter, I show that current account behaviours in emerging Asian economies are heterogenous. Initial stock of net foreign assets and degree of openness to international trade are important factors in explaining the long-run behaviour of current accounts. Moreover, the current accounts of all sample economies have a self-adjusting mechanism except China. Short run current account adjustment towards long-run equilibrium path is gradual, with the disequilibrium term being the main determinant of the short-run current account variations. Chapter 3 analyses current account sustainability of the short-run sample economies included in Chapter 2 in the context of the intertemporal budget constraint approach. Both strong and weak form tests of current account sustainability are performed in the study. Based on more generalised sustainability conditions, all the sample economies are found to be on a sustainable current account path. In addition, I find that accounting for endogenously identified structural breaks increases the instances of cointegration between an economy's exports and imports, which are more in favour of current account sustainability. Chapter 4 uses a three-country general equilibrium model to investigate the importance of consumption bias in generating equity portfolio bias. I find that the optimal holdings of non-traded goods equities are only affected by the separability between traded and non-traded goods, while optimal holdings of traded goods equities are determined by the household's preferences over domestic and foreign traded goods.

This thesis addresses three issues in international macroeconomics. Chapter 2 provides an empirical investigation of both the short- and long-term determinants of current accounts for the eight largest emerging Asian economies. The analysis is carried out within a cointegrated VAR framework. In this chapter, I show that current account behaviours in emerging Asian economies are heterogenous. Initial stock of net foreign assets and degree of openness to international trade are important factors in explaining the long-run behaviour of current accounts. Moreover, the current accounts of all sample economies have a self-adjusting mechanism except China. Short run current account adjustment towards long-run equilibrium path is gradual, with the disequilibrium term being the main determinant of the short-run current account variations. Chapter 3 analyses current account sustainability of the short-run sample economies included in Chapter 2 in the context of the intertemporal budget constraint approach. Both strong and weak form tests of current account sustainability are performed in the study. Based on more generalised sustainability conditions, all the sample economies are found to be on a sustainable current account path. In addition, I find that accounting for endogenously identified structural breaks increases the instances of cointegration between an economy's exports and imports, which are more in favour of current account sustainability. Chapter 4 uses a three-country general equilibrium model to investigate the importance of consumption bias in generating equity portfolio bias. I find that the optimal holdings of non-traded goods equities are only affected by the separability between traded and non-traded goods, while optimal holdings of traded goods equities are determined by the household's preferences over domestic and foreign traded goods.