CURRENT ACCOUNT DYNAMICS AND THE REAL EXCHANGE RATE: DISENTANGLING THE EVIDENCE

Content Provider	Scilit
Author	Bussière, Matthieu Karadimitropoulou, Aikaterini E. León-Ledesma, Miguel A.
Copyright Year	2018
Description	We study the main shocks driving current account (CA) fluctuations for the G6 economies, using a standard two-good intertemporal model. We build a structural vector autoregression model including the world real interest rate, net output (NO), the real exchange rate, and the CA and identify four structural shocks. Our results suggest four main conclusions: (i) there is substantial support for the two-good intertemporal model with time-varying interest rate, since both external supply and preference shocks account for an important proportion of CA fluctuations; (ii) temporary domestic shocks account for a large proportion of CA fluctuations, albeit smaller than in previous studies; (iii) our results alleviate the puzzle in the literature that a shock that explains little about NO changes can explain a large proportion of CA changes; (iv) the nature of the shock matters to shape the relationship between the CA and the real exchange rate.
Related Links	http://www.bankofgreece.gr/BogEkdoseis/Paper2017239.pdf https://www.cambridge.org/core/services/aop-cambridge-core/content/view/A26D884B81E4F240CAB3744F1C534042/S1365100518000561a.pdf/div-class-title-current-account-dynamics-and-the-real-exchange-rate-disentangling-the-evidence-div.pdf
Ending Page	58
Page Count	31
Starting Page	28
ISSN	13651005
e-ISSN	14698056
DOI	10.1017/s1365100518000561
Journal	Macroeconomic Dynamics
Issue Number	1
Volume Number	25
Language	English
Publisher	Cambridge University Press (CUP)
Publisher Date	2021-01-01
Access Restriction	Open
Subject Keyword	Macroeconomic Dynamics Mathematical Social Sciences Current Account Real Exchange Rate good Intertemporal Model
Content Type	Text
Resource Type	Article
Subject	Economics and Econometrics