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The Impact of Cyclical Factors on the U.S. Balance of Payments

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Author Info
Joshua E. Greene
Magda E. Kandil

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Abstract

Real GDP growth and real effective exchange rate (REER) appreciation appear cointegrated with the current and financial accounts of the U.S. balance of payments. On this basis, we estimate reduced form equations showing that expected changes and shocks to real GDP, the REER, energy prices, and growth in emerging market economies and other industrial countries explain much of the short-term variation in the U.S. current account balance, with the balance worsening as real GDP, energy prices, and the REER increase. In addition, foreign direct investment rises with real growth, while stock market prices affect the composition of capital inflows.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/45.

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Length: 43 pages
Date of creation: 26 Mar 2002
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Handle: RePEc:imf:imfwpa:02/45

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Keywords: Balance of payments ; United States ; Capital account ; Current account ; Financial sector ;

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. Hamid Faruqee & Peter Isard, 1998. "Exchange Rate Assessment: Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
  2. Ronald I. McKinnon, 2001. "The International Dollar Standard and the Sustainability of the U.S. Current Account Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 227-241. [Downloadable!]
  3. Cover, James Peery, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1261-82, November. [Downloadable!] (restricted)
  4. Milesi-Ferretti, G-M & Razin, A, 1996. "Current-Account Sustainability," Princeton Studies in International Economics 81, International Economics Section, Departement of Economics Princeton University,.
  5. 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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  6. Dufour, Jean-Marie, 1982. "Generalized Chow Tests for Structural Change: A Coordinate-Free Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 565-75, October. [Downloadable!] (restricted)
    Other versions:
  7. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February. [Downloadable!] (restricted)
  8. Engle, Robert F., 1982. "A general approach to lagrange multiplier model diagnostics," Journal of Econometrics, Elsevier, vol. 20(1), pages 83-104, October. [Downloadable!] (restricted)
  9. Magda E. Kandil, . "Demand-Side Stabilization Policies: What is the Evidence of Their Potential?," IMF Working Papers 00/197, International Monetary Fund.
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  10. Ronald McKinnon, 2001. "The International Dollar Standard and Sustainability of the U.S. Current Account Deficit," Working Papers 01013, Stanford University, Department of Economics. [Downloadable!]
  11. Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? A Cross-Sectional and Panel Approach," IMF Working Papers 96/58, International Monetary Fund.
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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.)

  1. Torsten Schmidt & Torge Middendorf, 2004. "Characterizing Movements of the U.S. Current Account Deficit," RWI Discussion Papers 0024, Rheinisch-Westfälisches Institut für Wirtschaftsforschung. [Downloadable!]
  2. Magda Kandil, 2006. "On the transmission of exchange rate fluctuations to the macroeconomy: Contrasting evidence for developing and developed countries," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 15(1), pages 101-127, March. [Downloadable!] (restricted)
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