IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Characterizing Movements of the U.S. Current Account Deficit

  • Torsten Schmidt

    ()

  • Torge Middendorf

    ()

It is unclear whether the exceptionally highU.S. current account deficit can be sustained for a prolonged period. In this paper we approach the topic whether a gradual adjustment or a pronounced reduction of the deficit is likely to occur. We therefore characterize the dynamics of the current account deficit movements by a three-regime Markov-Switching model. Our finding is that it is possible to distinguish a regime of a strong increasing deficit, a just slightly increasing deficit and a regime of a deficit reduction. Furthermore we find that movements of the deficit are asymmetric.Whereas expansions of the current account deficit are long lasting, reductions of the deficit are rather short. This implies that a pronounced reduction is not likely to occur. Secondly we try to uncover determinants of regime shifts of the current account. Applying ordered Logit models we conclude that a combination of U.S. inflation, U.S. investment and share prices predicts pronounced changes in the current account deficit quite reliably.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.rwi-essen.de/files/DP_04_024.pdf
Download Restriction: no

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number 0024.

as
in new window

Length: 19 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:rwi:dpaper:0024
Contact details of provider: Postal:
Hohenzollernstraße 1-3, 45128 Essen

Phone: (0201)8149-0
Fax: (0201)8149-200
Web page: http://www.rwi-essen.de/
Email:


More information through EDIRC

Order Information: Web: http://www.rwi-essen.de/publikationen/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Richard N. Cooper, 2001. "Is the U.S. Current Account Deficit Sustainable? Will It Be Sustained?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 217-226.
  2. Jeffrey J. Frankel and Andrew K. Rose., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers C96-062, University of California at Berkeley.
  3. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals and Sudden Stops," NBER Working Papers 10276, National Bureau of Economic Research, Inc.
  4. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  5. Maurice Obstfeld & Kenneth Rogoff, 2001. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," International Trade 0012004, EconWPA.
  6. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
  7. Sebastian Edwards, 2004. "Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 1-49, June.
  8. Reuven Glick & Kenneth Rogoff, 1992. "Global versus country-specific productivity shocks and the current account," Working Papers in Applied Economic Theory 92-06, Federal Reserve Bank of San Francisco.
  9. Menzie David Chinn & Eswar S Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries; An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
  10. Sebastian Edwards, 2001. "Does the Current Account Matter?," NBER Working Papers 8275, National Bureau of Economic Research, Inc.
  11. Genberg, Hans & Swoboda, Alexander K, 1992. " Saving, Investment and the Current Account," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 347-66.
  12. Benoît Mercereau, 2003. "The Role of Stock Markets in Current Account Dynamics; Evidence from the United States," IMF Working Papers 03/108, International Monetary Fund.
  13. James D. Hamilton & Baldev Raj, 2002. "New directions in business cycle research and financial analysis," Empirical Economics, Springer, vol. 27(2), pages 149-162.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rwi:dpaper:0024. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Weiler)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.