Dissecting the Dynamics of the US Trade Balance in an Estimated Equilibrium Model

Punnoose Jacob and Gert Peersman ()

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper presents empirical evidence on the stochastic driving forces of the US trade balance. In an estimated two-country DSGE model, we .find that investment- specific technology shocks have the strongest impact on the volatility of cyclical trade balance .fluctuations, especially when the shocks are domestic and considered over longer forecast-horizons. At shorter horizons, US and foreign inter-temporal shocks that generate co-movement between consumption and investment, have an impact com- parable to that of the investment-specific technology shocks. In contrast, shocks to US public spending and neutral technology - both forces traditionally used to explain trade balance fluctuations - hardly explain the volatility.

Keywords: US Trade Balance; New Open Economy Macroeconomics; Bayesian Inference; DSGE Estimation (search for similar items in EconPapers)
JEL-codes: C11 F41 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2008-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Dissecting the dynamics of the US trade balance in an estimated equilibrium model (2013)
Working Paper: Dissecting the dynamics of the US trade balance in an estimated equilibrium model (2013)
Working Paper: Dissecting the dynamics of the US trade balance in an estimated equilibrium model (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:08/544

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