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Modeling the U.S. Current Account as the Savings-Investment Balance: Technical Paper 2002-5

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  • Charles Bronowski
  • Juann H. Hung

Abstract

This paper derives and estimates a current account model from the perspective that the current account balance is the difference between national savings and investment. This approach allows us to include determinants of savings, investment, and capital flows to explain and forecast the evolution of the current account, an advantage not offered by the elasticity approach, which views the current account balance as the sum of net exports and net investment income. The savings-investment approach shows that the three traditional variables the real exchange rate, domestic

Suggested Citation

  • Charles Bronowski & Juann H. Hung, 2002. "Modeling the U.S. Current Account as the Savings-Investment Balance: Technical Paper 2002-5," Working Papers 14224, Congressional Budget Office.
    • Handle: RePEc:cbo:wpaper:14224
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    References listed on IDEAS

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    7. Persson, Torsten & Svensson, Lars E O, 1985. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 43-65, February.
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    Cited by:

    1. Darrin Downes & Winston Moore, 2007. "Does the exchange rate regime influence the relationship between the output gap and the current account?," Applied Economics, Taylor & Francis Journals, vol. 39(15), pages 1955-1960.

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