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Thousands of models, one story: current account imbalances in the global economy

  • Zorzi, Michele Ca'
  • Chudik, Alexander

    (Federal Reserve Bank of Dallas)

  • Dieppe, Alistair

The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. The chance that current accounts were aligned with fundamentals prior to the financial crisis appears to be minimal.

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File URL: http://www.dallasfed.org/assets/documents/institute/wpapers/2011/0100.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 100.

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Length: 31 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:fip:feddgw:100
Note: Published as: Ca' Zorzi, Michele, Alexander Chudik and Alistair Dieppe (2012), "Thousands of Models, One Story: Current Account Imbalances in the Global Economy," Journal of International Money and Finance 31 (6): 1319-1338.
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