Trend shocks and the countercyclical U.S. current account

David Amdur and Eylem Ersal Kiziler

MPRA Paper from University Library of Munich, Germany

Abstract: From 1960-2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that trend shocks to productivity can help explain the countercyclical U.S. current account. Our framework is a two-country, two-good real business cycle (RBC) model in which cross-border asset trade is limited to an international bond. We identify trend and transitory shocks to U.S. productivity using generalized method of moments (GMM) estimation. The specification that best matches the data assigns a large role to trend shocks. The estimated model generates a countercyclical current account without excessive consumption volatility.

Keywords: Current account; trend shocks; business cycles; open economy macroeconomics; DSGE models; GMM estimation (search for similar items in EconPapers)
JEL-codes: E21 E32 F32 F41 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Trend shocks and the countercyclical U.S. current account (2014)
Journal Article: Trend shocks and the countercyclical U.S. current account (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:40147

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