The present-value model of the current account has been rejected: round up the usual suspects

James Nason and John Rogers

No 760, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Tests of the present-value model of the current account are frequently rejected by the data. Standard explanations rely on the \"usual suspects\" of non-separable preferences, shocks to fiscal policy and the world real interest rate, and imperfect international capital mobility. We confirm these rejections on post-war Canadian data, then investigate their source by calibrating and simulating alternative versions of a small open economy, real business cycle model. Monte Carlo experiments reveal that, although each of the suspects matters in some way, a \"canonical\" RBC model moves closest to the data when it features exogenous world real interest rate shocks.

Keywords: Balance of payments; International finance; Econometric models (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.federalreserve.gov/pubs/ifdp/2003/760/default.htm (text/html)
http://www.federalreserve.gov/pubs/ifdp/2003/760/ifdp760.pdf (application/pdf)

Related works:
Journal Article: The present-value model of the current account has been rejected: Round up the usual suspects (2006)
Working Paper: The present-value model of the current account has been rejected: Round up the usual suspects (2003)
Working Paper: The Present Value Model of the Current Account Has Been Rejected: Round Up the Usual Subjects (2001)
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:fip:fedgif:760

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().