Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
963660 | Journal of International Money and Finance | 2010 | 18 Pages |
Abstract
Productivity shocks and budget deficits are considered to be two key determinants of the current account. In order to assess formally the role of both factors in driving current account movements, the present paper extends the standard intertemporal model of the current account to allow for Non-Ricardian household behavior. Testable cross-equation restrictions for the current account and investment are derived by drawing on the distinction between country-specific and global innovations to productivity as well as to the government budget. We test the restrictions of the model against time series data for 21 OECD countries and find evidence in support of the model.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Matthieu Bussière, Marcel Fratzscher, Gernot J. Müller,