Dissecting the dynamics of the US trade balance in an estimated equilibrium model

Punnoose Jacob and Gert Peersman ()

No DP2013/04, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: In an estimated two-country DSGE model, we find that shocks to the marginal efficiency of investment account for more than half of the forecast variance of cyclical fluctuations in the US trade balance. Both domestic and foreign marginal efficiency shocks generate a strong effect on the variability of the imbalance, through shifts in international relative absorption. On the other hand, shocks to uncovered interest parity and foreign export prices, which transmit mainly via the terms of trade and exchange rate, have a strong influence at short forecast-horizons, before the investment disturbances begin their dominance.

JEL-codes: C11 F41 (search for similar items in EconPapers)
Pages: 43 p.
Date: 2013-01
New Economics Papers: this item is included in nep-dge and nep-opm
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Citations: View citations in EconPapers (40)

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Related works:
Journal Article: Dissecting the dynamics of the US trade balance in an estimated equilibrium model (2013)
Working Paper: Dissecting the dynamics of the US trade balance in an estimated equilibrium model (2012)
Working Paper: Dissecting the Dynamics of the US Trade Balance in an Estimated Equilibrium Model (2008)
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