Investment and the current account in the short run and the long run
AbstractTheoretical 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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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 647.
Date of creation: 1999
Date of revision:
Other versions of this item:
- Nason, James M & Rogers, John H, 2002. "Investment and the Current Account in the Short Run and the Long Run," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 967-86, November.
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-11-28 (All new papers)
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- Robert G. King & Mark W. Watson, 1997.
"Testing long-run neutrality,"
Federal Reserve Bank of Richmond, issue Sum, pages 69-101.
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