A Study On The Influence Of Productivity Shock To Current Account

Because China becomes the biggest current account surplus country in2006, the current account surplus problem attracts attention of economists.Because of the difficulty of the problem, different theoretical modelsand empirical models lead to different answers. This article based on thetheoretical model of Glick and Rogoff，in the perspective of productivityshock to study current account.Through intertemporal equilibrium analysis, we find total factorproductivity (TFP)And investment has influence on current account. Current account as theexternal performance of saving-investment balance, total factor account cancross some ways to impact it. In this article, TFP through internationalcapital flow, income, output and exchange rate impact current account. Butthe different transmission mechanism implies the different results of impact.The theory suggests TFP not only increase current account surplus, but also decrease current account surplus.Firstly, this article describe the structure of current account, ourcountry’s current account is in trade surplus. They have the same trend. It isverified that current account and saving-investment balance have asignificant relationship in our country. Then we calculate China’s totalfactor productivity. The TFP of China and macroeconomic trends is same,and the volatility is same, too. When economic is booming, the TFP goeshigh. When it is in depression, the TFP goes low.This article establish empirical model including current account,investment and total factor productivity. The three exists the co integrationrelationship. According to the co integration equation, TFP has the positiveinfluence on current account. When TFP goes high, the current account issurplus. Investment has the negative influence on current account. Grangercausality test suggests investment and TFP impact current account. The testis same with co integration test.Although our country’s current account is surplus, current account has huge volatility. So it is necessary to studying the volatility of currentaccount. This article uses the gap of current account to measure thevolatility of current account. We establish the VAR of three variables.Volatility of current account, volatility of TFP and output volatility have thesame trend. Particularly, the output and TFP is coincidence in some years.The form of impulse response of current account volatility to outputvolatility is different with the form of impulse response of current accountvolatility to TFP volatility.The form of impulse response of currentaccount volatility to output volatility is positive, while he form of impulseresponse of current account volatility to TFP volatility is negative.TFPvolatility is the Granger cause of current account volatility.Output volatility is the Granger cause of current account volatility. Outputvolatility and TFP volatility is both Granger cause.