The Impact of Cyclical Factors on the U. S. Balance of Payments
March 1, 2002
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Summary
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. On this basis, we estimate reduced form equations showing 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, with the balance worsening as real GDP, energy prices, and the REER increase. In addition, foreign direct investment rises with real growth, while stock market prices affect the composition of capital inflows.
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
Pages:
43
Volume:
2002
DOI:
Issue:
045
Series:
Working Paper No. 2002/045
Stock No:
WPIEA0452002
ISBN:
9781451846485
ISSN:
1018-5941
