The Role of Stock Markets in Current Account Dynamics: Evidence from the United States

Benoît Mercereau

No 2003/108, IMF Working Papers from International Monetary Fund

Abstract: This paper tests a model of the role of stock markets in current account dynamics, developed in a companion paper. With U.S. data, the model performs better than the same model without stock markets. An insight given by the model is that the current account might help predict future stock market performance. This property receives some preliminary empirical confirmation. The results also suggest that stock markets matter to the current account dynamics.

Keywords: WP; net income; current account; stock markets; fundamental equation; U.S. data; forecasting; current account dynamics; equation of the current account; current account development; current account granger; savings choice; consumption literature; current account data; Stocks; Consumption; Futures markets; Global (search for similar items in EconPapers)
Pages: 35
Date: 2003-05-01
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Citations: View citations in EconPapers (10)

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