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Trend shocks and the countercyclical U.S. current account

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  • Amdur, David
  • Ersal Kiziler, Eylem

Abstract

From 1960-2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that trend shocks to productivity can help explain the countercyclical U.S. current account. Our framework is a two-country, two-good real business cycle (RBC) model in which cross-border asset trade is limited to an international bond. We identify trend and transitory shocks to U.S. productivity using generalized method of moments (GMM) estimation. The specification that best matches the data assigns a large role to trend shocks. The estimated model generates a countercyclical current account without excessive consumption volatility.

Suggested Citation

  • Amdur, David & Ersal Kiziler, Eylem, 2012. "Trend shocks and the countercyclical U.S. current account," MPRA Paper 40147, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:40147
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    References listed on IDEAS

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    Cited by:

    1. Ersal-Kiziler, Eylem, 2016. "International portfolio flows with growth shocks," Economics Letters, Elsevier, vol. 141(C), pages 84-86.

    More about this item

    Keywords

    Current account; trend shocks; business cycles; open economy macroeconomics; DSGE models; GMM estimation;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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