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! ]
The 'Great Moderation' and the US External Imbalance Author info | Abstract | Publisher info | Download info | Related research | Statistics Fogli, Alessandra
Perri, Fabrizio
Additional information is available for the following
registered author(s):
The early 1980s marked the onset of two striking features of the current world macro-economy: the fall in US business cycle volatility (the “great moderation”) and the large and persistent US external imbalance. In this paper we argue that an external imbalance is a natural consequence of the great moderation. If a country experiences a fall in volatility greater than that of its partners, its relative incentives to accumulate precautionary savings fall and this results in an equilibrium permanent deterioration of its external balance. To assess how much of the current US imbalance can be explained by this channel, we consider a standard two country business cycle model in which households are subject to country specific shocks they cannot perfectly insure against. The model suggests that a fall in business cycle volatility like the one observed for the US relatively to other major economies can account for about 20% of the current total US external imbalance.
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
page . Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
6010.
Download reference. The following formats are available: HTML
(with abstract ),
plain text
(with abstract ),
BibTeX ,
RIS (EndNote, RefMan, ProCite),
ReDIF
Length:
Date of creation: Dec 2006Date of revision:
Handle: RePEc:cpr:ceprdp:6010Contact details of provider: Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG Phone: 44 - 20 - 7183 8801 Fax: 44 - 20 - 7183 8820
Order Information: Email:
For technical questions regarding this item, or to correct its listing, contact: ().
Keywords: business cycle volatility ; current account ; net foreign asset position ; precautionary saving ; Other versions of this item:
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F34 - International Economics - - International Finance - - - International Lending and Debt Problems F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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.: Diego Comin & Mark Gertler, 2006.
"Medium-Term Business Cycles ,"
American Economic Review ,
American Economic Association, vol. 96(3), pages 523-551, June.
[Downloadable!]
Other versions:
Comin, D. & Gertler, M., 2003.
"Medium Term Business Cycles ,"
Working Papers
03-05, C.V. Starr Center for Applied Economics, New York University.
[Downloadable!] Diego Comin & Mark Gertler, 2003.
"Medium Term Business Cycles ,"
NBER Working Papers
10003, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Lane, Philip & Milesi-Ferretti, Gian Maria, .
"External Wealth of Nations ,"
Instructional Stata datasets for econometrics
extwealth, Boston College Department of Economics.
[Downloadable!]
Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An Equilibrium Model of Global Imbalances and Low Interest Rates ,"
2006 Meeting Papers
894, Society for Economic Dynamics.
[Downloadable!]
Other versions:
Caballero, Ricardo & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006.
"An Equilibrium Model of 'Global Imbalances' and Low Interest Rates ,"
CEPR Discussion Papers
5573, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Ricardo Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An Equilibrium Model of "Global Imbalances" and Low Interest Rates ,"
Center for International and Development Economics Research, Working Paper Series
1067, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
[Downloadable!] Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An Equilibrium Model of "Global Imbalances" and Low Interest Rates ,"
NBER Working Papers
11996, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Ricardo J Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An equilibrum model of "global imbalances" and low interest rates ,"
BIS Working Papers
222, Bank for International Settlements.
[Downloadable!] Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008.
"An Equilibrium Model of "Global Imbalances" and Low Interest Rates ,"
American Economic Review ,
American Economic Association, vol. 98(1), pages 358-93, March.
[Downloadable!] James H. Stock & Mark W. Watson, 2003.
"Has the Business Cycle Changed and Why? ,"
NBER Chapters ,
in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230
National Bureau of Economic Research, Inc.
[Downloadable!]
Other versions: David Backus & Espen Henricksen & Frederic Lambert & Chris Telmer, 2005.
"Current Account Fact and Fiction ,"
2005 Meeting Papers
115, Society for Economic Dynamics.
Margaret M. McConnell & Gabriel Perez-Quiros, 2000.
"Output Fluctuations in the United States: What Has Changed since the Early 1980's? ,"
American Economic Review ,
American Economic Association, vol. 90(5), pages 1464-1476, December.
[Downloadable!] (restricted)
Other versions:
Margaret M. McConnell & Gabriel Perez Quiros, 1998.
"Output fluctuations in the United States: what has changed since the early 1980s? ,"
Staff Reports
41, Federal Reserve Bank of New York.
[Downloadable!] Margaret M. McConnell & Gabriel Perez Quiros, 1997.
"Output fluctuations in the United States: what has changed since the early 1980s? ,"
Research Paper
9735, Federal Reserve Bank of New York.
[Downloadable!] Margaret McConnell & Gabriel Perez Quiros, 2000.
"Output fluctuations in the United States: what has changed since the early 1980s? ,"
Proceedings ,
Federal Reserve Bank of San Francisco, issue Mar.
[Downloadable!] James H. Stock & Mark W. Watson, 2005.
"Understanding Changes In International Business Cycle Dynamics ,"
Journal of the European Economic Association ,
MIT Press, vol. 3(5), pages 968-1006, 09.
[Downloadable!] (restricted)
Other versions: Sylvain Leduc & Keith Sill, 2003.
"Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility ,"
Working Papers
03-22, Federal Reserve Bank of Philadelphia.
[Downloadable!]
Other versions:
Sylvain Leduc & Keith Sill, 2006.
"Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility ,"
International Finance Discussion Papers
873, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!] Sylvain Leduc & Keith Sill, 2007.
"Monetary Policy, Oil Shocks, and TFP: Accounting for the Decline in U.S. Volatility ,"
Review of Economic Dynamics ,
Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 595-614, October.
[Downloadable!] (restricted) Enrique G. Mendoza & Vincenzo Quadrini & Jose-Victor Rios-Rull, 2007.
"Financial Integration, Financial Deepness and Global Imbalances ,"
NBER Working Papers
12909, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Baxter, Marianne & Crucini, Mario J, 1995.
"Business Cycles and the Asset Structure of Foreign Trade ,"
International Economic Review ,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
[Downloadable!] (restricted)
Other versions:
Baxter, M. & Crucini, M., 1991.
"Business Cycles and the Asset Structure of Foreign Trade ,"
RCER Working Papers
316, University of Rochester - Center for Economic Research (RCER).
Marianne Baxter & Mario J. Crucini, 1994.
"Business Cycles and the Asset Structure of Foreign Trade ,"
NBER Working Papers
4975, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Marianne Baxter & Mario J. Crucini, 1992.
"Business cycles and the asset structure of foreign trade ,"
Discussion Paper / Institute for Empirical Macroeconomics
59, Federal Reserve Bank of Minneapolis.
[Downloadable!] Sebastian Edwards, 2005.
"Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be? ,"
NBER Working Papers
11541, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Maurice Obstfeld & Kenneth S. Rogoff, 2005.
"Global Current Account Imbalances and Exchange Rate Adjustments ,"
Brookings Papers on Economic Activity ,
Economic Studies Program, The Brookings Institution, vol. 36(2005-1), pages 67-146.
[Downloadable!]
Olivier Blanchard & John Simon, 2001.
"The Long and Large Decline in U.S. Output Volatility ,"
Brookings Papers on Economic Activity ,
Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 135-174.
[Downloadable!]
Andres Arias & Gary D. Hansen & Lee E. Ohanian, 2006.
"Why Have Business Cycle Fluctuations Become Less Volatile? ,"
NBER Working Papers
12079, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992.
"International Real Business Cycles ,"
Journal of Political Economy ,
University of Chicago Press, vol. 100(4), pages 745-75, August.
[Downloadable!] (restricted)
Other versions: Heathcote, J. & Perri, F., 2001.
"Financial Globalization and Real Regionalization ,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
01-11, New York University, Leonard N. Stern School of Business-.
Other versions:
Jonathan Heathcote & Fabrizio Perri, 2002.
"Financial Globalization and Real Regionalization ,"
NBER Working Papers
9292, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Heathcote, Jonathan & Perri, Fabrizio, 2002.
"Financial Globalization and Real Regionalization ,"
CEPR Discussion Papers
3268, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Heathcote, Jonathan & Perri, Fabrizio, 2001.
"Financial Globalization and Real Regionalization ,"
Working Papers
01-05, Duke University, Department of Economics.
[Downloadable!] Jonathan Heathcote & Fabrizio Perri, 2001.
"Financial Globalization and Real Regionalization ,"
Working Papers
01-11, New York University, Leonard N. Stern School of Business, Department of Economics.
[Downloadable!] Jonathan Heathcote, 2003.
"Financial Globalization and Real Regionalization ,"
Working Papers
gueconwpa~03-03-20, Georgetown University, Department of Economics.
[Downloadable!] Heathcote, Jonathan & Perri, Fabrizio, 2004.
"Financial globalization and real regionalization ,"
Journal of Economic Theory ,
Elsevier, vol. 119(1), pages 207-243, November.
[Downloadable!] (restricted) Aiyagari, S Rao, 1994.
"Uninsured Idiosyncratic Risk and Aggregate Saving ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 109(3), pages 659-84, August.
[Downloadable!] (restricted)
Other versions:
Full
references Cited by : (explanations , 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.)
Marcel Fratzscher & Luciana Juvenal & Lucio Sarno, 2007.
"Asset prices, exchange rates and the current account ,"
Working Paper Series
790, European Central Bank.
[Downloadable!]
Other versions: Ellen R. McGrattan & Edward C. Prescott, 2009.
"Technology capital and the U.S. current account ,"
Staff Report
406, Federal Reserve Bank of Minneapolis.
[Downloadable!]
Other versions:
Ellen R McGrattan & Edward C Prescott, 2008.
"Technology Capital and the U.S. Current Account ,"
Levine's Bibliography
122247000000001827, UCLA Department of Economics.
[Downloadable!] Ellen R. McGrattan & Edward C. Prescott, 2008.
"Technology Capital and the U.S. Current Account ,"
NBER Working Papers
13983, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Ellen R. McGrattan & Edward C. Prescott, 2007.
"Technology capital and the U.S. current account ,"
Working Papers
646, Federal Reserve Bank of Minneapolis.
[Downloadable!] Irineu E. Carvalho Filho & Rudolfs Bems, 2009.
"Current Account and Precautionary Savings for Exporters of Exhaustible Resources ,"
IMF Working Papers
09/33, International Monetary Fund.
[Downloadable!]
Mendoza, Enrique G & Quadrini, Vincenzo & Ríos-Rull, José-Víctor, 2007.
"Financial Integration, Financial Deepness and Global Imbalances ,"
CEPR Discussion Papers
6149, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions: Silvio Contessi & Pierangelo DePace & Johanna Francis, 2008.
"The cyclical properties of disaggregated capital flows ,"
Working Papers
2008-041, Federal Reserve Bank of St. Louis.
[Downloadable!]
Other versions: James M. Nason & Gregor W. Smith, 2007.
"Great Moderation(s) and U.S. Interest Rates: Unconditional Evidence ,"
Working Papers
1140, Queen's University, Department of Economics.
[Downloadable!]
Other versions: Bonilla, Eugenio Diaz, 2008.
"Global macroeconomic developments and poverty: ,"
IFPRI discussion papers
766, International Food Policy Research Institute (IFPRI).
[Downloadable!]
James Feigenbaum & Geng Li, 2008.
"A Nonparametric Characterization of Income Uncertainty over the Lifecycle ,"
Working Papers
359, University of Pittsburgh, Department of Economics, revised Jul 2008.
[Downloadable!]
Jonathan Pincus & Richard Pomfret, 2009.
"The Financial Sector And The Future Of Capitalism ,"
Working Papers
2009-05, University of Adelaide, School of Economics.
[Downloadable!]
Marcel Fratzscher & Roland Straub, 2009.
"Asset Prices and Current Account Fluctuations in G7 Economies ,"
Working Paper Series
1014, European Central Bank.
[Downloadable!]
Other versions:
Access and
download statistics Did you know? The most prolific authors have over 700 items listed on IDEAS.
This page was last updated on 2009-10-29.
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 .