Does the US current account show a symmetric behavior over the business cycle?

- The literature usually explains a linear negative link between the US current account and output.
- I find a robust U-shaped relationship between the US current account and the GDP cycle.
- When output is above (below) its trend, current account and GDP are positively (negatively) correlated.
- This fact might be caused by persistent productivity shocks and uncertainty shocks of productivity.

Traditionally, the literature that attempts to explain the link between the current account and output finds a linear negative relationship (e.g., Backus, Kehoe, and Kydland, 1995). Using nonparametric regressions, we find a robust U-shaped relationship between the U.S. current account and the GDP cycle. When output is above (below) its trend the current account and detrended output are positively (negatively) correlated. We argue that this nonlinearity might be caused by persistent productivity shocks coupled with uncertainty shocks about future productivity.