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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Thousands of models, one story: current account imbalances in the global economy
Michele Ca' Zorzi
Alexander Chudik
Alistair Dieppe
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.


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Michele Ca' Zorzi & Alexander Chudik & Alistair Dieppe, Thousands of models, one story: current account imbalances in the global economy, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 100, 2011.
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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.
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