Education Expenditure And Current Account:Empirical Research

Global economic imbalances is mainly reflected in current account imbalances represented on the China-US,the mainstream reasons for explain current account imbalance are the investment savings hypothesis, the hypothesis fiscal deficit spending, exchange rates and population structure hypothesis and other hypotheses. But these studies mainly from the perspective of macroeconomic and macroeconomic behavior described, partly explains the reasons for global current account imbalances. This article’s research perspective is based on education expenditure to analyze and elaborate the causes and impact of current account imbalances.Education expenditure is an important foundation of a country’s economic development, with the deepening of globalization, how does affects education expenditure affect the competitiveness of a country’s trade or current account? Existing literature didn’t give any good answer to this question.. This paper argues that education expenditure can form human capital, improve labor productivity and then affecting income, the real exchange rate and unit product cost and other channels affect a country’s current account. Due to the differences of national education expenditure, and thus work out to current account is also different. Therefore, the study of the impact of education expenditure on the current account of in different development countries, not only can propose new perspective to the causes of current account imbalances, but also has some practical significance for the regulation of current account imbalances in the future.On the basis of the traditional research, education expenditure is added to the model of economic growth model and national income identity, we discussed the mechanism of the impacts of education expenditure to current account. To further examine the effect of differences in education expenditures on current account, we use the panel data education from45countries in2000to2011to current empirical test. Found that the impact of education expenditure on global current account is not significant.To examine the relationship between education expenditure and current account in different conditions levels of development, the national sample is divided over45studies for developed and developing countries respectively. The results show that in developed countries, the coefficient of education expenditure on current account is small and insignificant; but in developing countries, the impact of the former on the latter factor is0.2851, and through the test of significance of5%. The results also showed that the government deficit and foreign direct investment in developed countries significantly affect the current account, but the impact on developing countries is not so apparent, the coefficient is not significant.In order to investigate the effects of education expenditure on current account in China, we use the SVAR model to analyze China’s economic data from1980-2012, and then we analyze both impulse response functions and variance decomposition functions. The results show that for China, the impact of education expenditure on current account is positive and effective. Variance decomposition shows that education expenditure contributed about38%residual fluctuations of current account, residual fluctuations of education expenditure are basically from their own.