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The Relative Dynamics of Investment and the Current Account in the G7-Economies

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  • Hoffman, Mathias

Abstract

This 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 investigate empirically 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 (1995). In G7 data, we find the relative current-account and investment response to be in line with the intertemporal approach.

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  • 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 148-163, May.
  • Handle: RePEc:ecj:econjl:v:111:y:2001:i:471:p:c148-63
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    1. Glick, Reuven & Rogoff, Kenneth, 1995. "Global versus country-specific productivity shocks and the current account," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 159-192, February.
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    Citations

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    Cited by:

    1. Souki, Kaouthar & Enders, Walter, 2008. "Assessing the importance of global shocks versus country-specific shocks," Journal of International Money and Finance, Elsevier, vol. 27(8), pages 1420-1429, December.
    2. Giancarlo Corsetti & Panagiotis T. Konstantinou, 2012. "What Drives US Foreign Borrowing? Evidence on the External Adjustment to Transitory and Permanent Shocks," American Economic Review, American Economic Association, vol. 102(2), pages 1062-1092, April.
    3. Thomas Nitschka, 2005. "The U.S. consumption-wealth ratio and foreign stock markets: International evidence for return predictability," Money Macro and Finance (MMF) Research Group Conference 2005 22, Money Macro and Finance Research Group.
    4. Hoffmann, Mathias, 2013. "What drives China's current account?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 856-883.
    5. Elif C. Arbatli, 2008. "Futures Markets, Oil Prices and the Intertemporal Approach to the Current Account," Staff Working Papers 08-48, Bank of Canada.
    6. John C. Bluedorn, 2005. "Hurricanes: Intertemporal Trade and Capital Shocks," Economics Series Working Papers 241, University of Oxford, Department of Economics.
    7. Stefan Notz & Peter Rosenkranz, 2014. "Business cycles in emerging markets: the role of liability dollarization and valuation effects," ECON - Working Papers 163, Department of Economics - University of Zurich.
    8. Giancarlo Corsetti & Panagiotis Th. Konstantinou, 2009. "What Drives US Foreign Borrowing? Evidence on External Adjustment to Transitory and Permanent Shocks," Discussion Paper Series 2009_03, Department of Economics, University of Macedonia, revised Jan 2009.
    9. Matthieu Bussiere & Georgios Chortareas & Rebecca Driver, 2003. "Current Accounts, Net Foreign Assets and the Implications of Cyclical Factors," Eastern Economic Journal, Eastern Economic Association, vol. 29(2), pages 269-286, Spring.
    10. Boileau, Martin & Normandin, Michel & Powo Fosso, Bruno, 2010. "Global versus country-specific shocks and international business cycles," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 1-16, March.
    11. Ghassan, Hassan B. & Al-Jefri, Essam H., 2016. "الحساب الجاري للاقتصاد السعودي عبر نموذج داخلي الزمن دلائل من منهجية نموذج التقهقر الذاتي البنيوي
      [The Current Account of Saudi Economy through Intertemporal Model: Evidence from SVAR]
      ," MPRA Paper 80302, University Library of Munich, Germany, revised Jun 2017.

    More about this item

    JEL classification:

    • 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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