Current Account and Real Exchange Rate Dynamics in the G-7 Countries

 
Author/Editor: Chinn, Menzie David ; Lee, Jaewoo
 
Publication Date: August 01, 2002
 
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Summary: The canonical predictions of intertemporal open-economy macro models are tested by a structural VAR analysis of Group of Seven countries. The analysis is distinguished from the previous literature in that it adopts minimal assumptions for identification. Consistent with a large set of theoretical models, permanent shocks have large long-term effects on the real exchange rate but relatively small effects on the current account; temporary shocks have large effects on the current account and exchange rate in the short run, but not on either variable in the long run. The signs of some impulse responses point toward models that differentiate tradables and nontradables.
 
Series: Working Paper No. 02/130
Subject(s): Current account | Group of Seven | Canada | France | Germany | Italy | Japan | United Kingdom | United States | Real effective exchange rates | Economic models

Author's Keyword(s): Real exchange rate | current account | intertemporal models | permanent and temporary shocks
 
English
Publication Date: August 01, 2002
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1302002 Pages: 22
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