australia current account
on the current account
as a buffer for consumption, the main focus will be on the consumption-smoothing component of the current account.
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In deriving the intertemporal model of the current account, consider an economy composed of a large number of similar-lived consumers, each maximizing
V Empirical Results
The data used to estimate the parameters of the model are annual national accounts for the period 1954 to 1994, expressed in billions of 1990 Australian dollars,
and were obtained from the International Monetary Fund's International Financial Statistics database.18 All data are convented into real terms by dividing by the
implicit GDP deflator.19
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TABLE I
(i) Estimating the Consumption-Tilting Parameter The estimated consumption-tilting parameter from the cointegrating regression of national cash flow (less interest
payments) on consumption is reported in Table 2 for the full sample period 1954-94, and for two subsamples, 1954-74 and 1975-94. The break at 1974 was
used because this is when Australia's GDP growth rate fell below the world interest rate.20 In all three samples the estimated parameter is significantly less [next page]