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Conference Paper
Global current account adjustment: a decomposition
The rising current account deficit in the USA has attracted considerable attention in recent years. We use the ?business cycle accounting? methodology to identify the principal distortions that have affected the external accounts of the US. In particular, we measure distortions in the optimality conditions of a simple two-country general equilibrium model using data from the US and the other G7 countries. We then feed these measured distortions into the model individually and use the simulated counterfactual paths of the current account to determine the contribution of each of these ?wedges? ...
Working Paper
Global Current Account Adjustment: A Decomposition
Though China’s share of world trade is comparable to that of Japan, little is known about the response of China’s trade to changes in exchange rates. The few estimates available suffer from two limitations. First, the data for trade prices are based on proxies for prices from other countries. Second, the estimation sample includes the period of China’s transformation from a centrally planned economy to a market-oriented system. To address these limitations, this paper develops an empirical model explaining the shares of China’s exports and imports in world trade in terms of the real ...