Revisiting the Sources of U.S. Imbalances: A Wavelet Approach

Speaker: Prof Jun-Hyung Ko

Affiliaiton: Aoyama University

Location: Room 215, Chamberlain Building (#35), St Lucia Campus

Zoom: https://uqz.zoom.us/j/89790507770

Abstract: This paper employs the discrete wavelet method to investigate the sources of two significant U.S. current account imbalances that occurred in the 1980s and the 2000s. Consistent with theoretical implications, the relationships between the current account and the real interest rate are decomposed across both time and frequency domains. The primary findings are summarized as follows. First, during the 1980s, domestic factors, such as government spending, were the main drivers of both the deterioration and improvement of the U.S. current account. In contrast, the results for the 2000s are more nuanced: external factors appear to be the dominant cause of current account deteriorations, while domestic factors explain the subsequent improvement.