Exchange Rate and Current Account Dynamics Under Rational Expectations: An Econometric Analysis

David Papell

No 1576, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: An econometric portfolio balance model of an open economy, incorporating exchange rate, price, and current account dynamics, is derived and estimated.The usual stability conditions do not guarantee a unique rational expectations solution, and several proposals for resolving this situation are considered. Using constrained maximum likelihood methods, the model is estimated for Japan.The estimation results indicate that the model is quite successful in explaining the patterns found in the data. The model is estimated using several methods of resolving the question of non-uniqueness, and the results are compared.

Date: 1985-03
Note: ITI IFM
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Published as "Anticipated and Unanticipated Disturbances: The Dynamics of the Exchange Rate and the Current Account", Journal of International Money and Finance, Vol. 3, no. 2 (1984): 179-193.
Published as "Exchange Rate and Current Account Dynamics Under Rational Expectations: An Economic Analysis", International Economic Review, Vol. 27no. 3 (1986): 583-600.

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Journal Article: Exchange Rate and Current Account Dynamics under Rational Expectations: An Econometric Analysis (1986)
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