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Productivity shocks and capital flows

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  • El-Shagi, Makram

Abstract

In this letter, we demonstrate that the recent claim that productivity news shocks produce effects on trade and capital flows that are not in like with a standard Backus–Kehoe–Kydland model, are unique to the US and cannot be generalized. In a large set of developed countries, we show the BKK predictions to hold in both a stationary framework and using local projections to estimate impulse responses up to a 10 year horizon.

Suggested Citation

  • El-Shagi, Makram, 2023. "Productivity shocks and capital flows," Economics Letters, Elsevier, vol. 225(C).
    • Handle: RePEc:eee:ecolet:v:225:y:2023:i:c:s016517652300040x
    DOI: 10.1016/j.econlet.2023.111015
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    References listed on IDEAS

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    1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
    2. Paul Beaudry & Franck Portier, 2006. "Stock Prices, News, and Economic Fluctuations," American Economic Review, American Economic Association, vol. 96(4), pages 1293-1307, September.
    3. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1992. "Dynamics of the trade balance and the terms of trade: the J-curve revisited," Discussion Paper / Institute for Empirical Macroeconomics 65, Federal Reserve Bank of Minneapolis.
    4. Ric Colacito & Max Croce & Steven Ho & Philip Howard, 2018. "BKK the EZ Way: International Long-Run Growth News and Capital Flows," American Economic Review, American Economic Association, vol. 108(11), pages 3416-3449, November.
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    More about this item

    Keywords

    Trade; Capital flows; Productivity shocks;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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