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The Behavior of the Current Account in Response to Unobservable and Observable Shocks
University of Örebro.
McGill University, Montreal, Canada and University College of Skovde .ORCID iD: 0000-0002-8145-1000
2000 (English)In: International economic journal, ISSN 1016-8737, E-ISSN 1743-517X, Vol. 14, no 4, 41-57 p.Article in journal (Refereed) Published
Abstract [en]

The intertemporal approach to the balance of payments states that nonstationary flows in the current account will cointegrate or cotrend, unless there are permanent productivity shocks or long-run policy distortions. This paper examines the dynamics of the current account for a small open economy, using data from Sweden. The results show borderline cointegration for the current account. Recursive estimates disclose that there is no stable tendency towards finding cointegration. Cointegration is found for the first part of the sample, but from 1990 the cointegration test performs badly until speculative attacks force Sweden to give up the peg of the krona in 1992. In terms of the intertemporal approach, policy could be creating the imbalance, solved with the depreciation in 1992, after which the external accounts gradually move back to long-run equilibrium.

Place, publisher, year, edition, pages
Taylor & Francis, 2000. Vol. 14, no 4, 41-57 p.
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-115027DOI: 10.1080/10168730000000034OAI: oai:DiVA.org:liu-115027DiVA: diva2:793350
Available from: 2015-03-06 Created: 2015-03-06 Last updated: 2017-12-04Bibliographically approved

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Sjö, Bo

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  • apa
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  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
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Output format
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  • asciidoc
  • rtf