Trend Shocks and the Countercyclical U.S. Current Account

28 Pages Posted: 19 Jul 2012

See all articles by David Amdur

David Amdur

Muhlenberg College

Eylem Ersal Kiziler

University of Wisconsin - Whitewater

Multiple version iconThere are 2 versions of this paper

Date Written: January 2012

Abstract

From 1960-2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that trend shocks to productivity can help explain the countercyclical U.S. current account. Our framework is a two-country, two-good real business cycle (RBC) model in which cross-border asset trade is limited to an international bond. We identify trend and transitory shocks to U.S. productivity using generalized method of moments (GMM) estimation. The specification that best matches the data assigns a large role to trend shocks. The estimated model generates a countercyclical current account without excessive consumption volatility.

Keywords: current account, trend shocks, business cycles, open economy macroeconomics, DSGE models, GMM estimation

JEL Classification: E21, E32, F32, F41

Suggested Citation

Amdur, David and Ersal Kiziler, Eylem, Trend Shocks and the Countercyclical U.S. Current Account (January 2012). Available at SSRN: https://ssrn.com/abstract=2112695 or http://dx.doi.org/10.2139/ssrn.2112695

David Amdur (Contact Author)

Muhlenberg College ( email )

Allentown, PA 18104
United States

HOME PAGE: http://www.daveamdur.com

Eylem Ersal Kiziler

University of Wisconsin - Whitewater ( email )

800 W. Main
Whitewater, WI 53190
United States

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