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Common And Country-specific Fluctuations In Productivity, Investment, And The Current Account

Author

Listed:
  • Allan Gregory

    (B.A. (Toronto), Ph.D. (Queen's))

  • Allen Head

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.

Suggested Citation

  • Allan Gregory & Allen Head, 1996. "Common And Country-specific Fluctuations In Productivity, Investment, And The Current Account," Working Paper 931, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:931
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    G7; kalman filter; current account; Solow residual; investment;
    All these keywords.

    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

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