Dominant Drivers of Current Account Dynamics
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Summary:
We estimate shocks that explain most of the variation in the current account at business cycle frequencies and over the long run. We then explore, using a standard open-economy macro model, which macroeconomic shocks are behind the empirical dominant drivers of the current account at business-cycle frequency. Rather than financial shocks or aggregate shocks to supply or demand, shocks to the relative demand between home and foreign goods are found to play a pivotal role in current account dynamics.
Series:
Working Paper No. 2024/092
Subject:
Balance of payments Business cycles Current account Current account balance Economic growth Exchange rates Foreign exchange Nominal effective exchange rate
Frequency:
regular
English
Publication Date:
April 26, 2024
ISBN/ISSN:
9798400274961/1018-5941
Stock No:
WPIEA2024092
Format:
Paper
Pages:
47
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