Productivity shocks, habits, and the current account
By: Joseph W. Gruber.
Series: International finance discussion papers ;; no. 733; International finance discussion papers (Online) ;; no. 733.
Publisher: Federal Reserve Board
Published: 2002
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "Empirical work regarding Intertemporal Current Account (ICA) models has centered around two distinct testing methodologies, present value tests and a productivity shock approach as formulated in Glick and Rogoff (1995).  In previous work, Gruber (2001), I have tested an ICA model that allows for habits in aggregate consumption via the present value method.  This paper applies the alternative Glick and Rogoff style approach to testing the model.  The benefits of doing such are an ability to separate country-specific from worldwide output changes, a distinction of considerable importance, as well as to impose restrictions on the relationship between investment and output, neither of which are possible in the present value framework.  The results of the test are supportive of the existence of habits and coincide with the results of Gruber (2001).  The degree of habit persistence implied by the model is estimated for the G-7 countries.  The paper also proposes habit formation as a possible solution to an empirical puzzle identified in the original Glick and Rogoff paper"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 10/12/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.