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Does the US current account show a symmetric behavior over the business cycle?

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  • Roberto Duncan

Abstract

Traditionally, the literature that attempts to explain the link between the current account and output finds a linear negative relationship (e.g., Backus et al., 1995). Using nonparametric regressions, we find a robust U-shaped relationship between the U.S. current account and the GDP cycle. When output is above (below) its trend the current account and detrended output are positively (negatively) correlated. We argue that this nonlinearity might be caused by persistent productivity shocks coupled with uncertainty shocks about future productivity.

Suggested Citation

  • Roberto Duncan, 2015. "Does the US current account show a symmetric behavior over the business cycle?," Globalization Institute Working Papers 253, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:253
    DOI: 10.24149/gwp253
    Note: Published as: Duncan, Roberto (2016), "Does the US Current Account Show a Symmetric Behavior over the Business Cycle?" International Review of Economics & Finance 41: 202-219.
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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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