IDEAS home Printed from https://ideas.repec.org/a/eee/moneco/v44y1999i3p423-451.html
   My bibliography  Save this article

Common and country-specific fluctuations in productivity, investment, and the current account

Author

Listed:
  • Gregory, Allan W.
  • Head, Allen C.

Abstract

Dynamic factor analysis and Kalman filtering are used to construct a measure of common economic activity for the G7 countries. Common movements are important in productivity, but account for a substantially smaller share of movements in investment, and virtually none of the variation in the current accounts. For all seven countries, country-specific investment fluctuations have a significant negative impact on the current account, while country-specific productivity movements have little effect. A multi-country dynamic general equilibrium model is analyzed which is consistent with our qualitative findings. The model overstates, however, the quantitative importance of investment fluctuations for movements in the current account.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gregory, Allan W. & Head, Allen C., 1999. "Common and country-specific fluctuations in productivity, investment, and the current account," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 423-451, December.
    • Handle: RePEc:eee:moneco:v:44:y:1999:i:3:p:423-451
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-3932(99)00035-5
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864, Elsevier.
    2. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799, Elsevier.
    3. 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.
    4. Zimmermann, Christian, 1997. "International real business cycles among heterogeneous countries," European Economic Review, Elsevier, vol. 41(2), pages 319-356, February.
    5. Watson, Mark W, 1994. "Business-Cycle Durations and Postwar Stabilization of the U.S. Economy," American Economic Review, American Economic Association, vol. 84(1), pages 24-46, March.
    6. Gregory, Allan W & Head, Allen C & Raynauld, Jacques, 1997. "Measuring World Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 677-701, August.
    7. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-450, June.
    8. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-380, October.
    9. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
    10. Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-888, September.
    11. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-395, October.
    12. Tesar, Linda L., 1991. "Savings, investment and international capital flows," Journal of International Economics, Elsevier, vol. 31(1-2), pages 55-78, August.
    13. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-775, August.
    14. Devereux, Michael B. & Head, Allen C. & Lapham, Beverly J., 1996. "Aggregate fluctuations with increasing returns to specialization and scale," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 627-656, April.
    15. Kollmann, R., 1993. "Fiscal Policy, Technology Shcks and the US Trade Balance Deficit," Cahiers de recherche 9313, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    16. Christian Zimmermann, 1994. "Technology Innovations and the Volatility of Output: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 34, CREFE, Université du Québec à Montréal.
    17. Elliott, Graham & Fatas, Antonio, 1996. "International business cycles and the dynamics of the current account," European Economic Review, Elsevier, vol. 40(2), pages 361-387, February.
    18. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-222, April.
    19. Finn E. Kydland (ed.), 1995. "Business Cycle Theory," Books, Edward Elgar Publishing, number 565.
    20. Thomas J. Sargent & Christopher A. Sims, 1977. "Business cycle modeling without pretending to have too much a priori economic theory," Working Papers 55, Federal Reserve Bank of Minneapolis.
    21. Yi, Kei-Mu, 1993. "Can government purchases explain the recent U.S. net export deficits?," Journal of International Economics, Elsevier, vol. 35(3-4), pages 201-225, November.
    22. Watson, Mark W. & Engle, Robert F., 1983. "Alternative algorithms for the estimation of dynamic factor, mimic and varying coefficient regression models," Journal of Econometrics, Elsevier, vol. 23(3), pages 385-400, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ambler, Steve & Cardia, Emanuela & Zimmermann, Christian, 2004. "International business cycles: What are the facts?," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 257-276, March.
    2. 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.
    3. David Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," NBER Working Papers 4493, National Bureau of Economic Research, Inc.
    4. Asdrubali, Pierfederico & Kim, Soyoung, 2009. "Consumption smoothing channels in open economies," Journal of Banking & Finance, Elsevier, vol. 33(12), pages 2293-2300, December.
    5. Cook, David, 2002. "Market entry and international propagation of business cycles," Journal of International Economics, Elsevier, vol. 56(1), pages 155-175, January.
    6. Ravn, Morten O., 1997. "International business cycles in theory and in practice," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 255-283, April.
    7. Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October.
    8. Letendre, Marc-Andre, 2004. "Semi-parametric predictions of the intertemporal approach to the current account," Journal of International Economics, Elsevier, vol. 64(2), pages 363-386, December.
    9. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeiträge 69-98, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 2000.
    10. Fabio Canova & Jane Marrinan, 1996. "Sources and propagation of international cycles: Common shocks or transmission?," Economics Working Papers 188, Department of Economics and Business, Universitat Pompeu Fabra.
    11. Ikeda, Shinsuke & Gombi, Ichiro, 1999. "Habits, costly investment, and current account dynamics," Journal of International Economics, Elsevier, vol. 49(2), pages 363-384, December.
    12. Mario Crucini & Ayhan Kose & Christopher Otrok, 2011. "What are the driving forces of international business cycles?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 156-175, January.
    13. Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2010. "Productivity shocks, budget deficits and the current account," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1562-1579, December.
    14. Fernando Pérez de Gracia & Juncal Cuñado, "undated". "Intertemporal Current Account and Productivity Shocks: Evidence for Some European Countries," Working Papers on International Economics and Finance 01-05, FEDEA.
    15. Javier Gardeazabal & María Carmen Iglesias, "undated". "oCausan los ciclos del G7 el ciclo español?," Studies on the Spanish Economy 22, FEDEA.
    16. Henriksen, Espen & Kydland, Finn E. & Šustek, Roman, 2013. "Globally correlated nominal fluctuations," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 613-631.
    17. Eiriksson, Agust A., 2011. "The saving-investment correlation and origins of productivity shocks," Japan and the World Economy, Elsevier, vol. 23(1), pages 40-47, January.
    18. Sadka, Joyce C. & Yi, Kei-Mu, 1996. "Consumer durables, permanent terms of trade shocks, and the recent US trade deficits," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 797-811, October.
    19. Kwark, Noh-Sun, 1999. "Sources of international business fluctuations: Country-specific shocks or worldwide shocks?," Journal of International Economics, Elsevier, vol. 48(2), pages 367-385, August.
    20. Perron, Pierre & Wada, Tatsuma, 2016. "Measuring business cycles with structural breaks and outliers: Applications to international data," Research in Economics, Elsevier, vol. 70(2), pages 281-303.

    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:44:y:1999:i:3:p:423-451. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505566 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.