This paper examines to what extent the build-up of "global imbalances"
since the mid-1990s can be explained in a purely real open-economy
DSGE model in which agents' perceptions of long-run growth are based
on filtering observed changes in productivity. We show that long-run
growth estimates based on filtering U.S. productivity data comove
strongly with long-horizon survey expectations. By simulating the
model in which agents filter data on U.S. productivity growth, we
closely match the U.S. current account evolution. Moreover, with
household preferences that control the wealth effect on labor supply,
we can generate output movements in line with the data.
Date: January 6, 2012
Time: 11:30 A.M.
Seminar Room 2
Indian Statistical Institute Delhi Centre,
7, S. J. S. Sansanwal Marg,
New Delhi-110016 (INDIA)
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