Dominant Drivers of Current Account Dynamics

April 26, 2024

Preview Citation

Format: Chicago

Lukas Boer, and Jaewoo Lee. Dominant Drivers of Current Account Dynamics, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We estimate shocks that explain most of the variation in the current account at business cycle frequencies and over the long run. We then explore, using a standard open-economy macro model, which macroeconomic shocks are behind the empirical dominant drivers of the current account at business-cycle frequency. Rather than financial shocks or aggregate shocks to supply or demand, shocks to the relative demand between home and foreign goods are found to play a pivotal role in current account dynamics.

Subject: Balance of payments, Business cycles, Current account, Current account balance, Economic growth, Exchange rates, Foreign exchange, Nominal effective exchange rate

Keywords: Business cycles, Business-cycle frequency, CA shock, Current Account, Current account balance, Current account dynamics, Exchange Rates, Global, IMF working paper 24/92, Impulse response, Nominal effective exchange rate, Open- Economy Model, Relative Demand

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/092
Stock No:

WPIEA2024092
ISBN:

9798400274961
ISSN:

1018-5941

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