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Does the US current account show a symmetric behavior over the business cycle?

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  • Duncan, Roberto

Abstract

Traditionally, the literature that attempts to explain the link between the current account and output finds a linear negative relationship (e.g., Backus, Kehoe, and Kydland, 1995). Using nonparametric regressions, we find a robust U-shaped relationship between the U.S. current account and the GDP cycle. When output is above (below) its trend the current account and detrended output are positively (negatively) correlated. We argue that this nonlinearity might be caused by persistent productivity shocks coupled with uncertainty shocks about future productivity.

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  • Duncan, Roberto, 2016. "Does the US current account show a symmetric behavior over the business cycle?," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 202-219.
    • Handle: RePEc:eee:reveco:v:41:y:2016:i:c:p:202-219
    DOI: 10.1016/j.iref.2015.08.011
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    More about this item

    Keywords

    U.S. current account; Uncertainty shocks; Business cycles; Nonparametric regression;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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