Dominant Drivers of Current Account Dynamics

Dominant Drivers of Current Account Dynamics
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Volume/Issue: Volume 2024 Issue 092
Publication date: April 2024
ISBN: 9798400274961
$20.00
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Topics covered in this book

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Exports and Imports , Economics- Macroeconomics , Economics / General , Current Account , Exchange Rates , Relative Demand , Open- Economy Model , current account dynamics , IMF working paper 24/92 , business-cycle frequency , CA shock , impulse response , Nominal effective exchange rate , Current account balance , Business cycles , Global

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.