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Federal Reserve Bank of Dallas
Globalization Institute Working Papers
A threshold model of the US current account
Roberto Duncan

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.

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Roberto Duncan, A threshold model of the US current account, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 202, 01 Oct 2014.
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Note: Published as: Duncan, Roberto (2015), "A Threshold Model of the US Current Account," Economic Modeling 48: 270-280.
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DOI: 10.24149/gwp202
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