Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50583
Authors: 
Karadimitropoulou, Aikaterini
León-Ledesma, Miguel A.
Year of Publication: 
2009
Series/Report no.: 
School of Economics discussion papers 09,10
Abstract: 
We analyze the sources of current account fluctuations for the G6 economies. Based on Bergin and Sheffrin's (2000) two-goods inter-temporal framework, we build a SVAR model including the world real interest rate, net output, real exchange rate, and the current account. The theory model allows for the identification of structural shocks in the SVAR using longrun restrictions. Our results suggest three main conclusions: i) we find evidence in favour of the present-value model of the CA for all countries except France; ii) there is substantial support for the two-good intertemporal model, since both external supply and preferences shocks account for an important proportion of CA fluctuations; iii) temporary domestic shocks account for a large proportion of CA fluctuations, but the excess response of the CA is less pronounced than in previous studies.
Subjects: 
current account
real exchange rate
two-good intertemporal model
SVAR
JEL: 
F32
F41
Document Type: 
Working Paper

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