کانال های هموارسازی مصرف در اقتصاد باز

Many intertemporal open economy macro models imply a theory of consumption smoothing channels; thus we build an empirical model to analyze the intertemporal smoothing role of saving components (fixed investments, inventories and trade balance) through the use of VAR impulse responses to different types of shocks. We find that for the OECD countries the bulk of intertemporal smoothing has been carried out domestically, via gross fixed investments and inventories, but the trade balance has also played a relevant – albeit volatile – smoothing role. We also characterize the dynamic behavior of each component: the trade balance and inventories are mostly used as short-run smoothing tools while fixed investment provides more and more smoothing over time. We can also address some empirical puzzles, such as the “excess sensitivity of investment” anomaly (Glick, R., Rogoff, K., 1995. Global versus country-specific productivity shocks and the current account. Journal of Monetary Economics, 35, 159–192) and the “saving-investment correlation puzzle” (Feldstein, M., Horioka, C., 1980. Domestic saving and international capital flows. Economic Journal, 90, 314–329).

Modern open economy macroeconomics is based on intertemporal optimization, and in particular on the consumption smoothing condition imposed by the Euler equation. Yet not many empirical models in the field focus on the properties of consumption smoothing. This paper aims to set up a framework that analyzes the empirical implications of the open economy literature from the viewpoint of consumption smoothing channels. We impose minimal identifying restrictions on a vector auto-regression (VAR) model, and analyze smoothing channels in open economies jointly, through its estimated impulse responses. The econometric model we set up, and particularly the VAR specification of income and saving components, buffeted with various structural shocks, generalizes and deepens previous models, both in the smoothing channels and in the intertemporal current account literature. As for the former, our framework draws inspiration from such papers as Asdrubali et al. (1996) and Asdrubali and Kim, 2008a and Asdrubali and Kim, 2008b, who assess the overall degree of intertemporal smoothing among US states and OECD countries. These studies do not consider the role of investments and net exports, and use an unconditional static formulation of smoothing channels, where all lagged coefficients are set to zero and interactions among smoothing channels and endogeneity of income from channels are not allowed (as in Sørensen and Yosha, 1998). We explicitly consider the role of investment and net exports; in addition, following Asdrubali and Kim (2004), we set up a dynamic model that incorporates interactions among income and smoothing channels. We improve upon the existing consumption smoothing channels literature also by using quarterly data. This allows us to assess finer dynamic properties of smoothing channels at the business cycle frequency, providing a better connection with business cycle studies; but it also allows us to explore the evolution of intertemporal smoothing channels in various sub-periods without incurring in the efficiency loss inherent in a yearly estimation. As for our contribution to the intertemporal approach to the current account, Glick and Rogoff (1995) can be regarded as a special case of our model with fewer lags and fewer variables, which does not consider the interactions among various components of saving and income, while Sheffrin and Woo, 1990 and Ghosh, 1995 concentrate only on the unconditional current account behavior, in the sense that they do not separate various structural shocks. We find that our “smoothing approach” is quite fruitful, in the sense that all the saving channels we consider play a relevant stabilizing role in response to income shocks: the bulk of intertemporal smoothing is carried out domestically – through gross fixed investments, inventories, and government expenses – but the trade balance also plays a relevant smoothing role. In addition, we find that the dynamic behavior of each component is quite diverse; the trade balance and inventories are mostly used as short-run smoothing tools, while fixed investments (and possibly government expenditures) provide more and more smoothing over time. In addition, long run smoothing in the 90s is higher than in the 80s, due to the trade balance effect. Finally, since our framework can accommodate various models of the current account, we document empirically relevant mechanisms underlying the “excess sensitivity of investment” anomaly (Glick and Rogoff, 1995) – which turns out to be linked primarily to saving behavior – and the “saving-investment puzzle” (Feldstein and Horioka, 1980) – which seems to emerge after a productivity shock, and to disappear when the investment change is exogenous. The analysis proceeds as follows. Section 2 presents the econometric method for the consumption smoothing channels’ decomposition. Section 3 documents the empirical results based on the impulse responses of various smoothing channels to various sources of shocks. Section 4 presents results from extended exercises. Section 5 concludes with the summary of results.

We examine the way shocks of different nature propagate and are absorbed through various smoothing channels in OECD economies. A VAR model appears as the natural econometric methodology to address that issue, since VARs focus precisely on shock identification and propagation. Remarkably, in the period 1982–2000, about 73% of income shocks are cushioned on impact, by the trade balance (27%), inventories (25%) and gross fixed investments (22%). In the long run, the smoothing effect of gross fixed investments becomes preponderant (43%) relative to inventories and the trade balance (both scarcely significant around 10%). Thus, while investments are typically modelled as engines of capital accumulation and growth, they obviously play also a relevant intertemporal smoothing role, largely neglected by the empirical literature although implied by the theoretical models. The dynamic responses of each component are also informative: the trade balance and inventories are mostly used as short-run smoothing tools while fixed investment provides more and more smoothing over time. The 1990s, however, have seen a more important long run smoothing effect of the trade balance. Our model allows us to analyze also the effects of investment changes orthogonal to income changes. Shocks to gross fixed investment and inventories are mostly offset by a change in the trade balance, suggesting that investment changes, far from drawing on domestic savings, tend to be financed through international borrowing. Our results are generally consistent with the implications of the intertemporal approach to the current account, as well as small open economy DSGE models, but our impulse responses also reveal well-known puzzles. Following an unanticipated permanent income shock (and the consequent increase in net private income over time), the trade balance increases initially instead of falling, and by an amount smaller than the investment change (the “excess sensitivity of investment” puzzle). We document how the problem – which should be more appropriately labelled the “excess trade balance smoothing” puzzle – does not revolve around investment but rather lies in the lagged consumption reaction to net income changes; in other words, it is an expression of the Deaton’s paradox of excess smoothness of consumption of an unanticipated permanent income shock. Our analysis of trade balance shocks confirms previous evidence on the role of preference (consumption) shocks in the estimation of smoothing (Stockman and Tesar, 1995 and Asdrubali and Kim, 2004). The impact of such exogenous shocks on private income on one hand lends support to a non-negligible role of demand changes in the determination of equilibrium income; on the other hand, it endorses the appropriateness of the adoption of an econometric methodology, like VARs, which can accommodate endogenous feedbacks of variables.