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Dominant Drivers of Current Account Dynamics

Author

Listed:
  • Lukas Boer
  • Mr. Jaewoo Lee

Abstract

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.

Suggested Citation

  • Lukas Boer & Mr. Jaewoo Lee, 2024. "Dominant Drivers of Current Account Dynamics," IMF Working Papers 2024/092, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2024/092
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