Working Paper

Thousands of models, one story: current account imbalances in the global economy


Abstract: The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. The chance that current accounts were aligned with fundamentals prior to the financial crisis appears to be minimal.

JEL Classification: C11; C33; F32; F34; F41; O52;

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Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2011

Number: 100

Note: Published as: Ca' Zorzi, Michele, Alexander Chudik and Alistair Dieppe (2012), "Thousands of Models, One Story: Current Account Imbalances in the Global Economy," Journal of International Money and Finance 31 (6): 1319-1338.