Thousands of models,one story: Current account imbalances in the global economy |
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Authors: | Michele Ca&rsquo Zorzi,Alexander Chudik,Alistair Dieppe |
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Affiliation: | 1. European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany;2. Federal Reserve Bank of Dallas, 2200 N. Pearl Street, Dallas, TX 75201, USA;3. Centre for International Macroeconomics and Finance, UK |
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Abstract: | The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. The chance that current accounts were aligned with fundamentals prior to the financial crisis appears to be minimal. |
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Keywords: | C11 C33 F32 F34 F41 O52 |
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