TY  - JOUR
AU  - Clarida,Richard
AU  - Prendergast,Joe
TI  - Recent G2 Current Account Imbalances:  How Important are Structural Factors?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6935
PY  - 1999
Y2  - February 1999
UR  - http://www.nber.org/papers/w6935
L1  - http://www.nber.org/papers/w6935.pdf
N1  - Author contact info:
Richard H. Clarida
Columbia University
420 West 118th Street
Room 1111, IAB
New York, NY  10027
Tel: 212/854-3676
Fax: 212/854-8059
E-Mail: rhc2@columbia.edu
AB  - 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.
ER  -