This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Demand shocks and trade balance dynamics

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
José García-Solanes (Universidad de Murcia)
Jesús Rodríguez (Universidad Pablo de Olavide)
José L. Torres (Universidad de Málaga)

Additional information is available for the following registered author(s):

Abstract

This paper studies the current account dynamics in the G-7 countries plus Spain. We estimate a SVAR model which allows us to identify three different shocks: supply shocks, real demand shocks and nominal shocks. We use a different identification procedure from previous work based on a microfounded stochastic open-economy model in which the real exchange rate is a determinant of the Phillips curve. Estimates from a structural VAR show that real demand shocks explain most of the variability of current account imbalances, whereas, contrary to previous findings, nominal shocks play no role. The results we obtain are consistent with the predictions of a widely set of open-economy models and illustrate that demand policies are the main responsible of trade imbalances.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ucm.es/info/aeefi/pdf/defi07_04_final.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Spanish Chapter of the International Economics and Finance Society in its series Working Papers with number 07-04.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 35 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:aee:wpaper:0704

Contact details of provider:
Web page: http://www.aeefi.com
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Jose L. Torres).

Related research
Keywords: Current account SVAR

Other versions of this item:

Find related papers by JEL classification:
F3 - International Economics - - International Finance

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February. [Downloadable!] (restricted)
  2. Eswar S. Prasad & Jeffery A. Gable, 1998. "International Evidence on the Determinants of Trade Dynamics," IMF Staff Papers, Palgrave Macmillan Journals, vol. 45(3), pages 1. [Downloadable!] (restricted)
    Other versions:
  3. Carsten Detken & Vitor Gaspar, 2003. "Maintaining price stability under free-floating: a fearless way out of the corner?," Working Paper Series 241, European Central Bank. [Downloadable!]
  4. Arminio Fraga & Ilan Goldfajn & Andre Minella, 2003. "Inflation Targeting in Emerging Market Economies," NBER Working Papers 10019, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Richard Clarida & Jordi Gali, 1994. "Sources of real exchange rate fluctuations: how important are nominal shocks?," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
    Other versions:
  6. Faik Koray & W. Douglas McMillin, . "Fiscal Shocks, the Trade Balance, and the Exchange Rate," Departmental Working Papers 2006-02, Department of Economics, Louisiana State University. [Downloadable!]
    Other versions:
  7. Graham Elliott & Antonio Fatas, 1996. "International Business Cycles and the Dynamics of the Current Account," University of California at San Diego, Economics Working Paper Series 96-07, Department of Economics, UC San Diego.
    Other versions:
  8. Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January. [Downloadable!] (restricted)
    Other versions:
  9. Burstein, Ariel T., 2006. "Inflation and output dynamics with state-dependent pricing decisions," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1235-1257, October. [Downloadable!] (restricted)
  10. Joseph W. Gruber & Steven B. Kamin, 2005. "Explaining the global pattern of current account imbalances," International Finance Discussion Papers 846, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  11. Takashi Kano, 2003. "A Structural VAR Approach to the Intertemporal Model of the Current Account," Working Papers 03-42, Bank of Canada. [Downloadable!]
  12. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "SIGMA: a new open economy model for policy analysis," International Finance Discussion Papers 835, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  13. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September. [Downloadable!] (restricted)
  14. Leonardo Bartolini & Amartya Lahiri, 2006. "Twin deficits, twenty years later," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Oct. [Downloadable!]
  15. Mikhail Golosov & Robert E. Lucas, 2003. "Menu Costs and Phillips Curves," NBER Working Papers 10187, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Christopher Erceg & Luca Guerrieri, 2005. "Expansionary Fiscal Shocks and the Trade Deficit," Computing in Economics and Finance 2005 128, Society for Computational Economics. [Downloadable!]
    Other versions:
  17. Eswar Prasad, 1999. "International Trade and the Business Cycle," IMF Working Papers 99/56, International Monetary Fund.
    Other versions:
  18. Glick, Reuven & Rogoff, Kenneth, 1995. "Global versus country-specific productivity shocks and the current account," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 159-192, February. [Downloadable!] (restricted)
    Other versions:
  19. Martine Durand & Christophe Madaschi & Flavia Terribile, 1998. "Trends in OECD Countries’ International Competitiveness: The Influence of Emerging Market Economies," OECD Economics Department Working Papers 195, OECD Economics Department. [Downloadable!]
  20. Massimo Giuliodori, 2004. "Nominal shocks and the current account: A structural VAR analysis of 14 OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(4), pages 569-591, December. [Downloadable!] (restricted)
  21. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  22. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "Expansionary Fiscal Shocks and the US Trade Deficit," International Finance, Blackwell Publishing, vol. 8(3), pages 363-397, December. [Downloadable!] (restricted)
  23. Martin Eichenbaum & Jonas D.M. Fisher, 2004. "Evaluating the Calvo Model of Sticky Prices," NBER Working Papers 10617, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  24. Matthieu Bussière & Marcel Fratzscher & Gernot J. Müller, 2005. "Productivity shocks, budget deficits and the current account," Working Paper Series 509, European Central Bank. [Downloadable!]
Full references

Statistics
Access and download statistics

Did you know? To receive notification of recent additions to the database, subscribe to the free NEP reports.

This page was last updated on 2008-7-5.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.