The Impact of Cyclical Factors on the U.S. Balance of Payments
44 Pages Posted: 29 Jan 2006
Date Written: March 2002
Abstract
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.
Keywords: United States, balance of payments, current account, capital and financial account
JEL Classification: F3, F4
Suggested Citation: Suggested Citation
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