Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/105572 
Year of Publication: 
2012
Series/Report no.: 
School of Economics Discussion Papers No. 1217
Publisher: 
University of Kent, School of Economics, Canterbury
Abstract: 
This paper investigates the development of external imbalances from an international perspective by estimating a Global VAR model for the period 1981Q1-2009Q4 with a setup close to that of an international real business cycle model. The model considers 28 countries of which 10 are aggregated as the Eurozone. We compute generalized impulse response functions, as well as generalized forecast error variance decompositions, in order to measure the effects of shocks on international trade balances. The United States, Eurozone and China are considered as the sources of those shocks. We account for imbalances using real GDP, real effective exchange rates (REER) and real interest rates (RIR) as well as the oil price. Overall, we find evidence for the joint dynamics of our variables as drivers of the imbalances and relate our findings to theories of Global Imbalances. We show that real GDP is a relatively unimportant variable compared to the REER, RIR and the oil price. Moreover, we provide a counterfactual analysis of the US trade balance.
Subjects: 
Global Imbalances
Global VAR
International Trade
Open Economy Macroeconomics
JEL: 
F10
F32
F41
Document Type: 
Working Paper

Files in This Item:
File
Size
464.19 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.