The Role of Stock Markets in Current Account Dynamics : A Time Series Approach

Mercereau, Benoît

This paper develops a simple model to study the impact of stock markets on the current account. A closed-form solution for the current account is derived from the optimal portfolio and consumption/saving choices of a representative agent. Formally, the model can be seen as a stock market-augmented version of the ""fundamental equation of the current account"" popularized by Jeffrey Sachs. It appears to shed light on recent developments in the U.S. current account deficit. The model also shows how the current account may help predict future stock market performance and/or endowment streams

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Year of publication:	2004
Authors:	Mercereau, Benoît
Other Persons:	Mercereau, Benoît (contributor)
Publisher:	Washington, D.C : International Monetary Fund
Subject:	Leistungsbilanz \| Current account \| Aktienmarkt \| Stock market \| Theorie \| Theory \| Zeitreihenanalyse \| Time series analysis \| Kausalanalyse \| Causality analysis \| Unvollkommener Markt \| Incomplete market \| Portfolio-Management \| Portfolio selection