Current Account Dynamics: On Income and Trade Balance
Yushi Yoshida () and
Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)
We investigate the dynamics of Japan's income and trade balance between 1996:Q1 and 2019:Q4 via a structural VAR model. The two most important constituents of the current account (trade balance and income balance) and seven other macroeconomic variables are entered in our VAR model. We implement a shadow rate for the measure of monetary policy under the unconventional monetary policy regime, including a zero lower bound interest rate. By using a standard SVAR model from the literature, we find that world shocks dominate and rule the dynamics of Japan's current account. Through additional short-run zero restrictions, we also find that exogenous exchange rate shocks affect the current account.
Pages: 36 pages
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:21077
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