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Structural and Cyclical Movements of the Current Account in the U.S. 1976-2007

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  • Yoichi Matsubayashi

    ()
    (Graduate School of Economics, Kobe University)

Abstract

The purpose of this study is to analyze fluctuations in the current account of the U.S. by deconstructing structural and non-structural components with a new method. At the beginning of the 1980s, most components of the U.S. current account were structural. After the Plaza agreement in 1985, the U.S structural current account gradually improved. Since the end of the 1990s, the structural current account deficit increased to nearly 3% of GDP. These movements are generally associated with the structural components of private savings and residential investments. The upheaval in the US sub-prime home-loan market since 2007 sharply contracted housing investment and weakened consumption. Some simulations explored herein suggest a high possibility that these dynamics in domestic demand may considerably ameliorate the external imbalances of the U.S. and deteriorate of the dollar.

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File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2008/0829.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 0829.

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Length: 37 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:koe:wpaper:0829

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Web page: http://www.econ.kobe-u.ac.jp
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Keywords: Structural current account; Intertemporal optimization; Permanent income; Housing Investment; Equilibrium exchange rate;

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  1. James M. Nason & John H. Rogers, 2003. "The present-value model of the current account has been rejected: Round up the usual suspects," Working Paper, Federal Reserve Bank of Atlanta 2003-7, Federal Reserve Bank of Atlanta.
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  3. Glick, Reuven & Rogoff, Kenneth, 1995. "Global versus country-specific productivity shocks and the current account," Journal of Monetary Economics, Elsevier, Elsevier, vol. 35(1), pages 159-192, February.
  4. Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2004. "Current accounts dynamics in OECD and EU acceding countries - an intertemporal approach," Working Paper Series, European Central Bank 0311, European Central Bank.
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  7. Sheffrin, S.M. & Woo, W.T., 1989. "Present Value Tests Of An Intertemporal Model Of The Current Account," Papers, California Davis - Institute of Governmental Affairs 61, California Davis - Institute of Governmental Affairs.
  8. 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.
  9. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262150476, December.
  10. Ogawa, Kazuo, 1990. "Cyclical variations in liquidity-constrained consumers: Evidence from macro data in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 4(2), pages 173-193, June.
  11. Thierry Bracke & Matthieu Bussière & Michael Fidora & Roland Straub, 2008. "A framework for assessing global imbalances," Occasional Paper Series 78, European Central Bank.
  12. Kazuo Ueda, 1988. "Perspectives on the Japanese Current Account Surplus," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1988, Volume 3, pages 217-268 National Bureau of Economic Research, Inc.
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