Federal Reserve Bank of Dallas
Globalization Institute Working Papers
A threshold model of the US current account
What drives US current account imbalances? Is there solid evidence that the behavior of the current account is different during deficits and surpluses or that the size of the imbalance matters? Is there a threshold relationship between the US current account and its main drivers? We estimate a threshold model to answer these questions using the instrumental variable estimation proposed by Caner and Hansen (2004). Rather than concluding that the size or the sign of (previous) external imbalances matters, we find that time is the most important threshold variable. One regime exists before and another one exists after the third quarter of 1997, a period that coincides with the onset of the Asian financial crisis and the Taxpayer Relief Act of 1997. Statistically significant determinants in the second regime are the fiscal surplus, productivity, productivity volatility, oil prices, the real exchange rate, and the real interest rate. Productivity has become a more important driver since 1997.
Cite this item
Roberto Duncan, A threshold model of the US current account, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 202, 01 Oct 2014.
Note: Published as: Duncan, Roberto (2015), "A Threshold Model of the US Current Account," Economic Modeling 48: 270-280.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
This item with handle RePEc:fip:feddgw:202
is also listed on EconPapers
For corrections, contact Amy Chapman ()