The relative dynamics of investment and the current account in the G-7 economies
AbstractThis paper contributes to the empirics of the intertemporal approach to the current account. We use a cointegrated VAR framework to identify permanent and transitory components of country-specific and global shocks. Our approach allows us to empirically investigate the sensitivity to persistence implied by many forward-looking models and our results shed new light on the excess volatility of investment encountered by Glick and Rogoff (JME 1995). In G7 data, we find the relative current-account and investment response to be in line with the intertemporal approach. Keywords; intertemporal approach to the current account, cointegration, excess sensitivity, investment JEL classification: F41, F43
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Bibliographic InfoPaper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0005.
Date of creation: 01 Jan 2000
Date of revision:
Other versions of this item:
- Hoffman, Mathias, 2001. "The Relative Dynamics of Investment and the Current Account in the G7-Economies," Economic Journal, Royal Economic Society, vol. 111(471), pages C148-63, May.
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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