What Drives the Current Account in Commodity-Exporting Countries? The Cases of Chile and New Zealand

Juan Medina, Anella Munro and Claudio Soto ()

Journal Economía Chilena (The Chilean Economy), 2007, vol. 10, issue 3, 67-114

Abstract: This paper uses a DSGE model to explore what factors explain current account developments in Chile and New Zealand, two small open economies that are intensive commodity exporters. The model estimation shows that investment-specific shocks, foreign financial changes, and foreign demand shocks account for the bulk of the variation in the current accounts of the two countries. In New Zealand, fluctuations in commodity export prices have also been important. Counterfactual experiments indicate that (i) a peso denomination of the Chilean external debt would reduce the impact of external shocks on domestic variables; and (ii) changes in the degree of monetary policy aggressiveness in New Zealand offers little scope for modifying the exchange rate and current account dynamics.

Date: 2007
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Related works:
Chapter: What Drives the Current Account in Comodity Exporting Countries? The Cases of Chile and New Zealand (2008)
Working Paper: What drives the current account in commodity exporting countries? The cases of Chile and New Zealand (2008)
Working Paper: What Drives the Current Account in Commodity Exporting Countries? The Cases of Chile and New Zealand (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchec:v:10:y:2007:i:3:p:67-114

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