Does the US current account show a symmetric behavior over the business cycle?
Abstract: Traditionally, the literature that attempts to explain the link between the current account and output finds a linear negative relationship (e.g., Backus et al., 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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Description: Full text
Provider: Federal Reserve Bank of Dallas
Part of Series: Globalization Institute Working Papers
Publication Date: 2015-09-01
Pages: 33 pages
Note: Published as: Duncan, Roberto (2016), "Does the US Current Account Show a Symmetric Behavior over the Business Cycle?" International Review of Economics & Finance 41: 202-219.