NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Current Account Adjustment: Some New Theory and Evidence

Jiandong Ju, Shang-Jin Wei

NBER Working Paper No. 13388
Issued in September 2007
NBER Program(s):   IFM   ITI

This paper aims to provide a theory of current account adjustment that generalizes the textbook version of the intertemporal approach to current account and places domestic labor market institutions at the center stage. In general, in response to a shock, an economy adjusts through a combination of a change in the composition of goods trade (i.e., intra-temporal trade channel) and a change in the current account (i.e., intertemporal trade channel). The more rigid the labor market, the slower the speed of adjustment of the current account towards its long-run equilibrium. Three pieces of evidence are provided that are consistent with the theory.

download in pdf format
   (618 K)

email paper

This paper is available as PDF (618 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13388

Users who downloaded this paper also downloaded these:
Ventura w9163 Towards a Theory of Current Accounts
Backus, Henriksen, Lambert, and Telmer w15525 Current Account Fact and Fiction
Chinn and Wei w14420 A Faith-based Initiative: Does a Flexible Exchange Rate Regime Really Facilitate Current Account Adjustment?
Ferrero, Gertler, and Svensson w13906 Current Account Dynamics and Monetary Policy
Ju and Wei w12668 A Solution to Two Paradoxes of International Capital Flows
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us