The Impact of Cyclical Factors on the U. S. Balance of Payments

IMF Working Papers, March 1, 2002

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The Impact of Cyclical Factors on the U. S. Balance of Payments

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Bibliographic details

• Authors: Joshua E. Greene, Magda E. Kandil
• Published: March 1, 2002
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451846485.001

Summary findings

• Real GDP growth and real effective exchange rate (REER) appreciation appear cointegrated with the current and financial accounts of the U.S. balance of payments.
• Reduced form equations estimated in the paper show that expected changes and shocks to:
  • real GDP,
  • the REER,
  • energy prices, and
  • growth in emerging market economies and other industrial countries

explain much of the short-term variation in the U.S. current account balance.

• The U.S. current account balance worsens as:
  • real GDP increases,
  • energy prices increase, and
  • the REER increases.
• Foreign direct investment rises with real growth.
• Stock market prices affect the composition of capital inflows.

Methodology and analytical approach

• Cointegration analysis between real GDP growth, REER appreciation, and the current and financial accounts of the U.S. balance of payments.
• Estimation of reduced form equations to link expected changes and shocks in cyclical variables to short-term variation in the current account balance and financial account components.

Subject coverage and keywords

• Subject: Balance of payments, Current account, Current account balance, Energy pricing, Expenditure, Financial account, Foreign exchange, Real effective exchange rates
• Keywords: account, aggregate balance, balance, balance of payments, capital and financial account, current account, current account balance, Current account balance, current account deficit, current account worsening, Energy pricing, Financial account, form equation, GDP deflator, Global, Real effective exchange rates, real GDP, United States, WP

IMF Working Papers — "The Impact of Cyclical Factors on the U. S. Balance of Payments", Joshua E. Greene and Magda E. Kandil, March 1, 2002, Working Paper No. 2002/045, DOI: https://doi.org/10.5089/9781451846485.001

Content in this bundle

• The Impact of Cyclical Factors on the U.S. Balance of Payments - WP/02/45
  • The Impact of Cyclical Factors on the U.S. Balance of Payments - WP/02/45 (Markdown version)
  • The Impact of Cyclical Factors on the U.S. Balance of Payments - WP/02/45 (PDF)