Search Results
Conference Paper
Impact of globalization on monetary policy
Conference Paper
Developing country borrowing and domestic wealth
Working Paper
Global versus country-specific productivity shocks and the current account
For G-7 countries over the period 1961-1990, there appears to be a strong and stable negative correlation between annual changes in the current account and investment. Here we explore this correlation using a highly tractable empirical model that distinguishes between global and country-specific shocks. This distinction turns out to be quite important empirically, as global shocks account for roughly fifty percent of the overall variance of productivity. An apparent puzzle, however, is that the current account seems to respond by much less than investment to country-specific productivity ...
Working Paper
Was it real? : the exchange rate-interest differential relation, 1973 - 1984
The main result of Meese and Rogoff [1983 a,b] is that small structural exchange rate models forecast major dollar exchange rates no better than a naive random walk model. This result obtains even when the model forecasts are based on actual realized values of the explanatory variables. Here we improve our methodology by implementing a new test of out-of-sample fit; the test is valid even for overlapping long-horizon forecasts. We find that the dollar exchange rate models perform somewhat less badly over the recent Reagan regime period than over the episodes studied previously. The ...
Conference Paper
The unsustainable U.S. current account position revisited
We show that the when one takes into account the global equilibrium ramifications of an unwinding of the US current account deficit, currently running at nearly 6% of GDP, the potential collapse of the dollar becomes considerably larger (more than 50% larger) than our previous estimates (Obstfeld and Rogoff 2000a). It is true that global capital market deepening appears to have accelerated over the past decade (a fact documented by Lane and Milesi-Ferreti (2005) and recently emphasized by US Federal Reserve Chairman Alan Greenspan), and that this deepening may have helped allowed the United ...
Working Paper
Global versus country-specific productivity shocks and the current account
The intertemporal approach to the current account is often regarded as theoretically elegant but of limited empirical significance. This paper derives highly tractable current account and investment specifications that we estimate without resorting to calibration or simulation methods. In time-series data for eight industrialized countries, we find that country-specific productivity shocks tend to worsen the current account, whereas global shocks have little effect. Both types of shock raise investment. It is a puzzle, however, for the intertemporal model that long-lasting local productivity ...