EconPapers    
Economics at your fingertips  
 

Are current accounts driven by competitiveness or asset prices? A synthetic model and an empirical test

Alexander Guschanski () and Engelbert Stockhammer ()

No 17935, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: This paper analyses the emergence of current account imbalances as a result of the co-existence of trade flows and financial flows. The literature has tended to view these factors in isolation: Many post-Kaleckian models, as well as Net-saving approaches assume that financial flows will adjust to trade flows. Models focusing on financial crises feature a strong role for financial flows but ignore drivers of trade flows. Similarly, empirical analyses either ignore drivers of financial flows or insufficiently capture determinants of trade flows. The paper, first, proposes a simple macroeconomic framework of the current account which gives equal emphasis to trade flows, determined by price competitiveness, and financial flows, determined by asset prices. Second, we test a reduced form of the model for 28 OECD countries for the period 1971-2014. Our results indicate that cost competitiveness as well as asset prices play a role in the determination of current accounts, but asset prices have dominated in the last two decades.

Keywords: current account; financial flows; competitiveness; asset prices (search for similar items in EconPapers)
JEL-codes: E12 F32 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-mac, nep-opm and nep-pke
Date: 2017-10-28
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://gala.gre.ac.uk/17935/1/CA%20imb%20draft%201_00%20gppe%20%281%29.pdf orginal version
http://gala.gre.ac.uk/17946/1/CA%20imb%20draft%201_00%20gppe%20%282%29.pdf revised version

Related works:
Working Paper: Are current accounts driven by competitiveness or asset prices? A synthetic model and an empirical test (2017) Downloads
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:gpe:wpaper:17935

Access Statistics for this paper

More papers in Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Nadine Edwards ().

 
Page updated 2018-11-14
Handle: RePEc:gpe:wpaper:17935