Productivity shocks, budget deficits and the current account

Matthieu Bussiere, Marcel Fratzscher and Gernot Müller

Journal of International Money and Finance, 2010, vol. 29, issue 8, 1562-1579

Abstract: Productivity shocks and budget deficits are considered to be two key determinants of the current account. In order to assess formally the role of both factors in driving current account movements, the present paper extends the standard intertemporal model of the current account to allow for Non-Ricardian household behavior. Testable cross-equation restrictions for the current account and investment are derived by drawing on the distinction between country-specific and global innovations to productivity as well as to the government budget. We test the restrictions of the model against time series data for 21 OECD countries and find evidence in support of the model.

Keywords: Current; account; Productivity; shocks; Budget; deficits (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261-5606(10)00075-6
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Productivity shocks, budget deficits and the current account (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:29:y:2010:i:8:p:1562-1579

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().