Download This PaperDissecting the Dynamics of the US Trade Balance in an Estimated Equilibrium Model
National Bank of Belgium Working Paper No. 226
47 Pages Posted: 13 Aug 2012
Date Written: August 1, 2012
Abstract
In an estimated two-country DSGE model, we find that shocks to the marginal efficiency of investment account for more than half of the forecast variance of cyclical fluctuations in the US trade balance. Both domestic and foreign marginal efficiency shocks have a substantial impact on the variability of the imbalance. On the other hand, while traditional technology shocks can generate counter-cyclical trade balance dynamics, they matter very little for the overall forecast variance.
Keywords: Open Economy Macroeconomics, US Trade Balance, Investment Shocks, Bayesian Estimation of DSGE Models
JEL Classification: C11, F41
Suggested Citation: Suggested Citation
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