First, the applicability of a widely used dynamic model, the autoregressive distributed lag model ARDLis scrutinized in a panel data setting. A computation of errors is added to highlight the susceptibility of the model to problems related to the underlying model assumptions. Evidence from Market Shares 1. This dynamic model has been adapted from studies of inter alia Balestra and NerloveBaltagi and LevinArellano and BondBlundell et al.
In mos neremporal models of he curren accoun, counry specfc producvy has ambguous effecs on he curren accoun dependng on wheher consumpon effec or nvesmen effec domnaes.
The objecve of hs paper s o nvesgae he role of producvy shocks, n combnaon wh nvesmen behavor, as a source for curren accoun dynamcs for some European counres durng he perod We decompose oal producvy shocks beween global and specfc shocks and we examne he role of global and counry specfc producvy shocks for he curren accoun and nvesmen dynamcs.
Ths neremporal model has been exended n many drecons n he heorecal leraure, o nclude nvesmen, governmen spendng, varable neres raes, nonraded goods, producvy shocks, and moneary polcy.
Feldsen and Horoka Documentos de economia y finanzas internacionales a hgh correlaon beween long erm savng and nvesmen of OECD counres and he coeffcen of a regresson of nvesmen on savng s close o uny. Ths resul s surprsng because seems a odds wh large and perssen exernal mbalances ha have been observed n OECD economes, as well as ndcaons of large gross and ne capal flows n hese economes snce he s.
In hs paper we sudy he relaonshp beween producvy shocks and he curren accoun. The response predced by economc heory of a gven counry s curren accoun o a parcular ype of shock depends on he specfc way n whch he economc neracons beween counres are modeled.
Suppose a relavely smple dynamc wo counry world economy wh one comsumpon good. In hs model, he effec of a emporary ncrease n producvy n one counry on ha counry s curren accoun s ambguous. On he one hand, he shock emporarly ncreases ha counry s ncome causng o lend o he res of he world n order o smooh consumpon over me.
On he oher hand, o he exend ha he shock s perssen wll nduce ha counry o borrow from he res of he world o fnance a emporary nvesmen boom. The frs effec pushes he counry s curren accoun oward surplus whle he second pushes oward defc. The overall response of he curren accoun hen depends on he magnudes of hese wo conflcng effecs wh he key ssue beng he perssence of he shock.
Of course, hs dscusson has focused on he effecs of a counry-specfc shock.
In hs model, assumng counres are symmerc a common 1 The neremporal approach o he curren accoun has many conrbuons ha ncludes BuerSachs, ObsfeldDornbuschSvensson and RaznPersson and Svenssonand Frenkel and Razn among ohers.
These conrbuons are surveyed n Obsfeld and Rogoffand Lane The objecve of hs paper s o nvesgae he role of producvy shocks, n combnaon wh nvesmen behavor, as a source for curren accoun dynamcs. We decompose oal producvy shocks beween global and specfc shocks and we examne he role of global and counry specfc producvy shocks for he curren accoun dynamcs usng a srucural economerc model derved from he heory.
Ths dsncon beween global and specfc shocks s essenal. If a shock hs all counres n he world symmercally, he curren accoun effec wll be much smaller han f hs jus one small counry. The paper s organzed n he followng way. Secon 1 summarzes he economc leraure abou shocks o producvy and he curren accoun - nvesmen behavor whle Secon 2 presens he basc feaures of he neremporal curren accoun model.
Secon 3 uses hs model o sudy how nvesmen and he curren accoun respond o dfferen producvy shocks. Fnally, Secon 4 provdes some concludng remarks. Producvy versus curren accoun nvesmen dynamcs In an nfluenal sudy, Feldsen and Horoka esed he nuvely appealng proposon ha n fully negraed world capal markes, here s no correlaon beween a naon s savng rae and s rae of nvesmen.
Ths resul, whch holds n boh cross-secon and me seres daa, s surprsng because seems a odds wh large and perssen exernal mbalances ha have been 2 Ths model s descrbed n Secon 2. On he oher hand, f capal mobly s perfec, nvesmen changes can be ndependen of savng changes. Followng Baxer and Crucn f a counry experences a posve echnology shock a he same me as he res of he world, wll be unable o borrow abroad o augmen s capal sock, gven ha he res of he world wshes o do he same.
Despe perfec capal mobly, any rse n nvesmen n hs case mus be fnanced by a rse n savng, as households smooh consumpon over he emporary rse n oupu.
Such models can explan he savng-nvesmen correlaons and he curren accoun nvesmen correlaons ypcally observed n he daa. Because he effecs of shocks on he curren accoun may be ambguous, emprcal analyss has ofen focused on he relaonshp beween nvesmen flucuaons and he curren accoun. Glck and Rogoff have nroduced an nnovave approach o sudy macroeconomcs relaonshps n an open economy.
Ther approach nvolved dervng analycally racable curren accoun and nvesmen equaons when here are global and counry-specfc producvy shocks. In a nushell her model makes wo predcons.
Frs, counry-specfc producvy shocks affec he curren accoun more han nvesmen, because boh consumpon and nvesmen respond o 4 varey of explanaons have been offered o reconcle Feldsen - Horoka s fndngs of a hgh coeffcen wh a hgh degree of capal mobly.
One explanaon s ha esmaes are conamnaed by smulaneous equaon bas, because of he endogeney of boh nvesmen and savng. Obsfeld pons ou ha a hgh coeffcen n nvesmen-savng regressons may reflec he nfluence of a common facor, such as economc growh, on boh savng and nvesmen.
In hs spr Baxer and Crucn proposed ha producvy shocks relae savng o nvesmen. They also show ha savng-nvesmen correlaons wll be larger n larger 4 6 changes n producvy nducng a larger response by he curren accoun.
Nason and Rogers exend he approach o a srucural VR of frs dfferences n he curren accoun and nvesmen.
They ls a se of sx resrcons mpled by neremporal models; some of hese resrcons are used o acheve denfcaon of he model, and he model s esed usng he remanng overdenfyng resrcons. Under ceran denfcaons, her resuls suppor he mplcaons of he neremporal, small open economy. However, hese resuls are sensve o perurbaons of he denfcaons.
Gregory and Head esmae counry-specfc componens n producvy and nvesmen so ha hey can evaluae her effecs on her counres curren accouns.1 Introduction This paper focuses on the implications of uniform output subsidies as a wel-fare maximising policy in an imperfectly competitive market.
DOCUMENTOS DE ECONOMÍA Y FINANZAS INTERNACIONALES DEFI Carmen Díaz-Roldán Vicente Esteve Asociación Española de Economía y Finanzas Internacionales ISSN: DEFICIT SUSTAINABILITY AND INFLATION IN (Universidad de Castilla-La Mancha and Instituto de Estudios Fiscales) Carmen Díaz-Roldán (Universidad de Castilla-La.
DOCUMENTOS DE ECONOMIA Y FINANZAS INTERNACIONALES On Distributed Lags in Dynamic Panel Data Models: Las opiniones contenidas en los Documentos de la Serie DEFI, reflejan exclusivamente las de los autores y no necesariamente las de attheheels.com: Felicitas Nowak-Lehmann, Dierk Herzer, Sebastian Vollmer, Inmaculada Martínez-Zarzoso.
DOCUMENTOS DE ECONOMÍA Y FINANZAS INTERNACIONALES DEFI December Trade growth in a heterogeneous firm model: Evidence from South Eastern yLondon School of Economics and Catholic University of Leuven. E-mail: [email protected] The structure of import ⁄ows can be de–ned and analysed analogously.
DOCUMENTOS DE ECONOMIA Y FINANZAS INTERNACIONALES On Distributed Lags in Dynamic Panel Data Models: Evidence from Market Shares Felicitas Nowak-Lehmann D. DOCUMENTOS DE ECONOMÍA Y FINANZAS INTERNACIONALES Working Papers on International Economics and Finance DEFI 14‐11 November Fiscal policy and the real exchange rate.