The Impact of Cyclical Factors on the U. S. Balance of Payments

Joshua Greene and Magda Kandil

No 2002/045, IMF Working Papers from International Monetary Fund

Abstract: Real GDP growth and real effective exchange rate (REER) appreciation appear cointegrated with the current and financial accounts of the U.S. balance of payments. On this basis, we estimate reduced form equations showing that expected changes and shocks to real GDP, the REER, energy prices, and growth in emerging market economies and other industrial countries explain much of the short-term variation in the U.S. current account balance, with the balance worsening as real GDP, energy prices, and the REER increase. In addition, foreign direct investment rises with real growth, while stock market prices affect the composition of capital inflows.

Keywords: WP; balance; account; real GDP; United States; balance of payments; current account; capital and financial account; current account balance; current account deficit; GDP deflator; form equation; current account worsening; aggregate balance; Current account balance; Financial account; Real effective exchange rates; Energy pricing; Global (search for similar items in EconPapers)
Pages: 43
Date: 2002-03-01
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Citations: View citations in EconPapers (14)

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