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What Drives the Current Account in Commodity-Exporting Countries? The Cases of Chile and New Zealand

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  • Juan Pablo Medina G.
  • Anella Munro
  • Claudio Soto G.

Abstract

This paper uses a DSGE model to explore what factors explain current account developments in Chile and New Zealand, two small open economies that are intensive commodity exporters. The model estimation shows that investment-specific shocks, foreign financial changes, and foreign demand shocks account for the bulk of the variation in the current accounts of the two countries. In New Zealand, fluctuations in commodity export prices have also been important. Counterfactual experiments indicate that (i) a peso denomination of the Chilean external debt would reduce the impact of external shocks on domestic variables; and (ii) changes in the degree of monetary policy aggressiveness in New Zealand offers little scope for modifying the exchange rate and current account dynamics.

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Bibliographic Info

Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 10 (2007)
Issue (Month): 3 (December)
Pages: 67-114

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Handle: RePEc:chb:bcchec:v:10:y:2007:i:3:p:67-114

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Cited by:
  1. Juan Pablo Medina & Anella Munro & Claudio Soto, 2008. "What drives the current account in commodity exporting countries? The cases of Chile and New Zealand," BIS Working Papers 247, Bank for International Settlements.
  2. Chris Bloor & Rebecca Craigie & Anella Munro, 2012. "The macroeconomic effects of a stable funding requirement," Reserve Bank of New Zealand Discussion Paper Series DP2012/05, Reserve Bank of New Zealand.
  3. Andrew Filardo & Jason George & Mico Loretan & Guonan Ma & Anella Munro & Ilhyock Shim & Philip Wooldridge & James Yetman & Haibin Zhu, 2010. "The international financial crisis: timeline, impact and policy responses in Asia and the Pacific," BIS Papers chapters, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 21-82 Bank for International Settlements.
  4. Juan Pablo Medina & Claudio Soto, 2007. "The Chilean Business Cycles Through the Lens of a Stochastic General Equilibrium Model," Working Papers Central Bank of Chile, Central Bank of Chile 457, Central Bank of Chile.
  5. Paul Cashin & Samya Beidas-Strom, 2011. "Are Middle Eastern Current Account Imbalances Excessive?," IMF Working Papers 11/195, International Monetary Fund.
  6. Camilo E Tovar, 2008. "DSGE models and central banks," BIS Working Papers 258, Bank for International Settlements.

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