Interest Rates, Exchange Rates and Present Value Models of the Current Account

摘要: This paper develops a testable intertemporal model of the current account that allows for variable interest rates and exchange rates. These additional variables are channels through which external shocks may influence domestic account. The restrictions from theoretical subjected to present value tests using quarterly data three small open economies. finds including rate improves fit over what was found in previous studies. predictions better replicate volatility explain historical episodes imbalance.