English, Article, Journal or magazine article edition: Asset Prices and Current Account Fluctuations in G7 Economies. Marcel Fratzscher; Roland Straub

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Bookmark: http://trove.nla.gov.au/version/211557
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Asset Prices and Current Account Fluctuations in G7 Economies.
Author
  • Marcel Fratzscher
  • Roland Straub
Physical Description
  • preprint
Notes
  • The paper analyses the effect of equity price shocks on current account positions for the G7 industrialized countries in 1974-2007. It uses a Bayesian VAR with sign restrictions for the identification of asset price shocks and to test empirically for their effect on current accounts. Such shocks are found to exert a sizeable effect, with a 10 percent equity price increase for instance in the United States relative to the rest of the world worsening the US trade balance by 0.9 percentage points after 16 quarters. However, the response of the trade balance to equity price shocks varies substantially across countries. The evidence suggests that the channels accounting for this hetero-geneity function both through wealth effects on private consumption and to some extent through the real exchange rate of countries. JEL Classification: E2, F32, F40, G1.
  • asset prices, current account, identification, Bayesian VAR, financial markets, industrialized economies.
  • RePEc:ecb:ecbwps:200901014
Language
  • English
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