Are There Thresholds of Current Account Adjustment in the G7?

Richard H. Clarida, Manuela Goretti () and Mark P. Taylor ()

No 12193, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We find evidence of threshold behavior in current account adjustment for the G7 countries, such that the dynamics of adjustment towards equilibrium depend upon whether the current-account/ net-output ratio breaches estimated, country specific current account surplus or deficit thresholds. Both the speeds of adjustment and the size of the thresholds are found to differ significantly across countries. In addition, we also find evidence of shifts in means and variances of exchange rate changes, stock returns, and interest differentials that coincide with the current account adjustment regimes identified by the model.

JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cba, nep-fmk and nep-ifn
Date: 2006-05
Note: IFM ITI
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Chapter: Are There Thresholds of Current Account Adjustment in the G7? (2007)
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