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Investment and the current account in the short run and the long run

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Author Info
James M. Nason
John H. Rogers

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Abstract

Theoretical models of the relationship between investment and the current account impose restrictions on the joint dynamic behavior of these variables. These restrictions come in two forms. One imposes causal orderings on investment and the current account. The other restriction concerns the permanent responses of these variables to different shocks. We use these restrictions to identify empirically structural shocks from vector autoregressions of investment and the current account for Canada. Under certain identifications, our results support the implications of the intertemporal, small open economy model. However, these results are sensitive to perturbations of the identifications.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 647.

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Date of creation: 1999
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Handle: RePEc:fip:fedgif:647

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Keywords: Investments ; Balance of payments;

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  1. Robert King & Mark W. Watson, 1992. "Testing Long Run Neutrality," NBER Working Papers 4156, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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(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.)

  1. Rungrudee Suetorsak, 2006. "Banking crisis in east asia: A micro/macro perspective," Review of Quantitative Finance and Accounting, Springer, vol. 26(3), pages 219-248, May. [Downloadable!] (restricted)
  2. Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Fabio Ghironi & Talan B. Iscan & Alessandro Rebucci, 2005. "Net Foreign Asset Positions and Consumption Dynamics in the International Economy," IMF Working Papers 05/82, International Monetary Fund. [Downloadable!]
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  4. Takashi Kano, 2003. "A Structural VAR Approach to the Intertemporal Model of the Current Account," Working Papers 03-42, Bank of Canada. [Downloadable!]
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  5. James M. Nason & John H. Rogers, 2003. "The present-value model of the current account has been rejected: round up the usual suspects," International Finance Discussion Papers 760, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  6. Helmut Herwartz & Florian Siedenburg, 2007. "Determinants of Current Account Imbalances in 16 OECD Countries: An Out-Of-Sample Perspective," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(2), pages 349-374, July. [Downloadable!] (restricted)
  7. Fernando Pérez de Gracia & Juncal Cuñado, . "Intertemporal Current Account and Productivity Shocks: Evidence for Some European Countries," Working Papers on International Economics and Finance 01-05, FEDEA. [Downloadable!]
  8. Talan B. Iscan & U.L. Gouranga Rao, 2000. "Investment and the Current Account: A Triangular Model of the G-7 Key words: Investment; current account; triangular simultaneous equations model; random coefficients regression model," Department of Economics at Dalhousie University working papers archive rao, Dalhousie, Department of Economics. [Downloadable!]
  9. Michel Normandin & Bruno Powo Fosso, 2006. "Global versus Country-Specific Shocks and International Business Cycles," Cahiers de recherche 0601, CIRPEE. [Downloadable!]
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  10. Pierfederico Asdrubali & Soyoung Kim, 2005. "Consumption Smoothing Channels in Open Economies," International Finance 0506009, EconWPA. [Downloadable!]
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  11. Aikaterini Karadimitropoulou & Miguel A. León-Ledesma, 2009. "Sources of Current Account Fluctuations in Industrialized Countries," Studies in Economics 0910, Department of Economics, University of Kent. [Downloadable!]
  12. Richard Clarida & Joe Prendergast, 1999. "Recent G2 Current Account Imbalances: How Important are Structural Factors?," NBER Working Papers 6935, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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