The Impact of Cyclical Factors on the U.S. Balance of Payments

44 Pages Posted: 29 Jan 2006

See all articles by Magda Kandil

Magda Kandil

International Monetary Fund (IMF)

Joshua Eli Greene

Singapore Management University

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

Kandil, Magda and Greene, Joshua Eli, The Impact of Cyclical Factors on the U.S. Balance of Payments (March 2002). IMF Working Paper No. 02/45, Available at SSRN: https://ssrn.com/abstract=879436

Magda Kandil (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Joshua Eli Greene

Singapore Management University ( email )

90 Stamford Road
178903
Singapore