What Causes the Volatility of the Balancing Item?

Abstract

This paper analyzes the impacts of timing errors, capital flows and economic openness on the behavior of the balancing item. We choose Norway, Sweden, Philippines and South Africa as sample countries where the size of the balancing item is often excess the IMF`s criterion of `smallness`. The empirical results show that the sources of the volatility of the balancing item are different among these four countries.