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Trend shocks and the countercyclical U.S. current account

Listed author(s):
  • Amdur, David
  • Ersal Kiziler, Eylem

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.

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File URL: https://mpra.ub.uni-muenchen.de/40147/1/MPRA_paper_40147.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40147.

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Date of creation: Jan 2012
Handle: RePEc:pra:mprapa:40147
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