Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189250
Authors: 
Gregory, Allan W.
Head, Allen C.
Year of Publication: 
1996
Series/Report no.: 
Queen's Economics Department Working Paper 931
Abstract: 
Dynamic factor analysis and Kalman filtering are used to construct a measure of common economic activity for the G7 countries. Common movements are important in productivity, but account for a substantially smaller share of movements in investment, and virtually none of the variation in the current accounts. For all seven countries, country-specific investment fluctuations have a significant negative impact on the current account, while country-specific productivity movements have little effect. A multi-country dynamic general equilibrium model is analyzed which is consistent with our qualitative findings. The model overstates, however, the quantitative importance of investment fluctuations for movements in the current account.
Subjects: 
kalman filter
current account
Solow residual
investment
G7
JEL: 
F41
C32
Document Type: 
Working Paper
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