US trade balance dynamics: the role of fiscal policy and productivity shocks and of financial market linkages

Article Abstract:

Domestic productivity had the biggest impact on export fluctuations and the trade balance of the United States during the 1975-1991 period. This was determined by a two-country Real Business Cycle model, which also evaluated the role of fiscal policy and foreign productivity changes in the export swings during the same period. The model utilized productivity data as well as data about state purchases and taxes of the G7 countries. A modification of the model assuming that international capital movement is largely limited to bonds sharply mirrors US trade balance data from 1975-1991.

Fiscal Policy, Merchandise Trade Balance, Balance of trade

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Consumption, real exchange rates and the structure of international asset markets

Article Abstract:

International real business cycle models with complete asset markets have not effectively predicted the trend behavior and high-frequency movements of consumption and real exchange rates. Empirical evidence provided by data from the US, Japan, France, the UK, Italy, Canada and Sweden indicate the failure of these models to sufficiently explain such behavior. Results also failed to confirm the validity of a close relationship between the growth rates of consumption between any two countries and the growth rates of their bilateral real exchange rate.

Research, Prices and rates, Foreign exchange, Foreign exchange rates

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Government consumption and private consumption correlations

Article Abstract:

A business cycle model can explain the manifested correlations between government spending and private consumption when business cycle disturbances are attributed solely to government spending shocks. This is also true when the mode of expenditure is replaceable with private consumption. However, when technology variables are considered along with government expenditure, the observed international correlations do not surface. This finding is still consistent even if the expenditure and private consumption is highly replaceable.

Expenditures-Total Govt, Government Purchases Deflator, Government spending policy, Public expenditures

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