Long-run growth expectations and 'global imbalances'

Mathias Hoffmann, Michael Krause and Thomas Laubach

No 2011,01, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

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.

Keywords: open economy DSGE models; trend growth; Kalman filter; real-time data; news and business cycles; current account (search for similar items in EconPapers)
JEL-codes: D83 E32 F32 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-dge, nep-fdg, nep-mac and nep-opm
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Citations: View citations in EconPapers (5)

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Working Paper: Long-run growth expectations and "global imbalances" (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:201101

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