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Long-run growth expectations and 'global imbalances'

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  • Hoffmann, Mathias
  • Krause, Michael
  • Laubach, Thomas

Abstract

This paper examines to what extent the build-up of 'global imbalances' since the mid-1990s can be explained in a purely real open-economy DSGE model in which agents' perceptions of long-run growth are based on filtering observed changes in productivity. We show that long-run growth estimates based on filtering U.S. productivity data comove strongly with long-horizon survey expectations. By simulating the model in which agents filter data on U.S. productivity growth, we closely match the U.S. current account evolution. Moreover, with household preferences that control the wealth effect on labor supply, we can generate output movements in line with the data.

Suggested Citation

  • Hoffmann, Mathias & Krause, Michael & Laubach, Thomas, 2011. "Long-run growth expectations and 'global imbalances'," Discussion Paper Series 1: Economic Studies 2011,01, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:201101
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    Cited by:

    1. Daniele Siena, 2014. "The European Monetary Union and Imbalances: Is it an Anticipation Story ?," Working papers 501, Banque de France.
    2. Bettendorf, Timo, 2017. "Investigating Global Imbalances: Empirical evidence from a GVAR approach," Economic Modelling, Elsevier, vol. 64(C), pages 201-210.
    3. Liu, Kai & Zhou, Xuan, 2015. "The U.S. Dollar and Global Imbalances," MPRA Paper 64786, University Library of Munich, Germany.
    4. David Amdur & Eylem Ersal Kiziler, 2014. "Trend shocks and the countercyclical U.S. current account," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(2), pages 494-516, May.
    5. Dan Cao & Jean-Paul L'Huillier, 2012. "Technological Revolutions and Debt Hangovers - Is There a Link?," EIEF Working Papers Series 1216, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2013.
    6. Hoffmann, Mathias & Krause, Michael U. & Laubach, Thomas, 2012. "Trend growth expectations and U.S. house prices before and after the crisis," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 394-409.

    More about this item

    Keywords

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    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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