Macroeconomic volatility and external imbalances

نویسندگان

  • Alessandra Fogli
  • Fabrizio Perri
چکیده

This paper studies the impact of macroeconomic volatility/uncertainty on the accumulation of net foreign assets of a country. We first show that, in OECD economies over the period 1970-2012, increases in country specific macroeconomic volatility are, after controlling for wide array of factors, significantly associated with accumulation of net foreign assets. An increase in volatility (measured as standard deviation of GDP growth) of 0.5% over a period 10 years, is associated with an increase in net foreign assets of around 8% of GDP. We then show a that standard open economy model with time varying macroeconomic uncertainty can quantitatively account for this relationship. The key mechanism is agents’ precautionary motive: an increase in relative macro uncertainty induces more savings, which are mostly channeled in the accumulation of foreign assets. We conclude that macroeconomic volatility is a major factor in determining the medium and long run evolution of external imbalances across OECD countries. jel codes: f32, f34, f41 key words: Business cycles, Current account, Global Imbalances, Precautionary saving, Uncertainty ∗We thank Ctirad Slavik and Alberto Polo for outstanding research assistance, Cedric Tille and Daniele Siena for very insightful discussions, seminar participants at several institutions and conferences for very helpful comments. We also thank the European research Council for financial support under grant Grant 313671 ”RESOCONBUCY”. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

Macroeconomic dataset for generating macroeconomic volatility among selected countries in the Asia Pacific region

This data article provides macroeconomic data that can be used to generate macroeconomic volatility. The data cover a sample of seven selected countries in the Asia Pacific region for the period 2004-2014, including both developing and developed countries. This dataset was generated to enhance our understanding of the sources of macroeconomic volatility affecting the countries in this region. A...

متن کامل

The Macro Content of the PRSPs: Assessing the Need for a more Flexible Macroeconomic Policy Framework

This paper analyses the macroeconomic content of 15 PRSPs from a growth and poverty reduction perspective. It finds that, in the main and contrary to new trends in developed and middle income countries, their macroeconomic policy frameworks lack the necessary flexibility to deal with external shocks and to appropriately address macroeconomic volatility. To ilustrate the point, their fiscal and ...

متن کامل

International Liquidity and Exchange Rate Dynamics

We provide a theory of the determination of exchange rates based on capital flows in imperfect financial markets. Capital flows drive exchange rates by altering the balance sheets of financiers that bear the risks resulting from international imbalances in the demand for financial assets. Such alterations to their balance sheets cause financiers to change their required compensation for holding...

متن کامل

Intermediate Goods Trade and Macroeconomic Volatility: The Case of Iran-China Trade Relations

This paper tries to analyze the impacts of intermediate goods trade on production, consumption, investment, net exports, employment, labor wage and capital rent of Iran in its bilateral trade relations with China. This analysis has been done by modeling, solving and calibrating an international real business cycles (IRBC) model in period 1980-2009. The results show that when elasticity of subst...

متن کامل

Fluctuations in Exchange Rate and its Impact on Macroeconomic Performance of Pakistan

The present study was conducted to examine the extent and direction of exchange rate volatility and its impact on macroeconomic performance of Pakistan. It is implied that exchange rate volatility has direct bearings on macroeconomic variables and thus on macroeconomic performance. This study also investigates the effect of exchange rate (independent variable) of Pak Rupee to US Dollar on selec...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2009