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

Author/Editor: Chinn, Menzie David | Lee, Jaewoo
Authorized for Distribution: August 1, 2002
Electronic Access: Free Full Text (PDF file size is 641KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

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  
    Published:   August 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1302002   Pages:   22
    Price:   US$15.00
       
     
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