NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Recent G2 Current Account Imbalances: How Important are Structural Factors?

Richard Clarida, Joe Prendergast

NBER Working Paper No. 6935
Issued in February 1999
NBER Program(s):   IFM

This paper implements a novel empirical approach for estimating the importance of structural factors in explaining the recent behavior of G3 current account positions. Following the contribution of Sims (1982), we employ a tractable econometric framework that can be used to answer the following basic question: assuming that there is a stable underlying structure that links the current account with other macroeconomic variables such as economic growth, world demand, and the real exchange rate, how important are the observed departures of these variables from their long run equilibrium levels in accounting for the observed adjustments in a country's current account? Our approach interprets the departure of the actual current account from this estimated structural component of the current account path as arising from a combination of cyclical and idiosyncratic factors. The cyclical influences on the current account are assumed to be captured by the deviations of the multilateral real exchange rate, home GDP growth, and global GDP growth from their respective long run averages.

download in pdf format
   (547 K)

email paper

This paper is available as PDF (547 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6935

Users who downloaded this paper also downloaded these:
Chinn and Prasad w7581 Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration
Clarida and Prendergast w7077 Fiscal Stance and the Real Exchange: Some Empirical Estimates
Alesina and Dollar w6612 Who Gives Foreign Aid to Whom and Why?
Edwards w10276 Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops
Clarida w12194 G7 Current Account Imbalances: Sustainability and Adjustment
 
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