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The expectations-driven US current account

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

Since 1991, survey expectations of long-run output growth for the U.S. relative to the rest of the world exhibit a pattern strikingly similar to that of the U.S. current account, and thus also to global imbalances. We show that this finding can to a large extent be rationalized in a two-region stochastic growth model simulated using expected trend growth filtered from observed productivity. In line with the intertemporal approach to the current account, a major part of the buildup of the U.S. current account deficit appears to be driven by the optimal response of households and firms to improved growth prospects.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 10/2013.

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Date of creation: 2013
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Handle: RePEc:zbw:bubdps:102013
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  1. Ippei Fujiwara & Yasuo Hirose & Mototsugu Shintani, 2008. "Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach," IMES Discussion Paper Series 08-E-16, Institute for Monetary and Economic Studies, Bank of Japan.
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  13. Feldstein, Martin, 2008. "Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate," Scholarly Articles 2792081, Harvard University Department of Economics.
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