| Author: | Elliott, G. Fatas, A. |
| Title: | International business cycles and the dynamics of the current account |
| Journal: | European Economic Review
1996 : FEB, VOL. 40:2, p. 361-387 |
| Index terms: | INTERNATIONAL BUSINESS CAPITAL CURRENT ACCOUNT BUSINESS CYCLES |
| Language: | eng |
| Abstract: | In the paper, the transmission of productivity shocks across countries is analyzed. The responses of investment and the current account differences depending on the degree of propagation of shocks are also explored. Both issues are reviewed by estimating a structural model for Europe, Japan and the US. It is postulated that the propagation of shocks is proportional to trade. In the paper, it is found a strong asymmetry in that shocks to the US propagate quickly to the other two economies while European and Japanese shocks have minor impact in other countries' productivity. It is also found that productivity increases lead to domestic investment booms and current account deficits. Quantitative differences among the three countries in the response of the current account are also found. |
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