We propose a simple saving-based measure of the cyclical component in GDP. The measure is motivated by the prediction that the represenative consumer changes savings in response to temporary deviations of income from its stochastic trend, while satisfying a present-value budget constraint. To...

The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in...