The expectations-driven US current account

Mathias Hoffmann (), Michael Krause and Thomas Laubach

No 10/2013, Discussion Papers from Deutsche Bundesbank

Abstract: 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.

Keywords: open economy; stochastic trend growth; Kalman filter; news shocks (search for similar items in EconPapers)
JEL-codes: D83 E13 E32 F32 O40 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-opm
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The Expectations-driven US Current Account (2019)
Working Paper: The Expectations-Driven U.S. Current Account (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:102013

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