Abstract
This paper investigates the development of external imbalances from an international perspective by estimating a Global VAR model. Specifically, we simulate the effects of shocks to relevant macroeconomic variables in the United States and the oil price on international trade balances and quantify the relative importance of these shocks using variance decompositions. Overall, we find evidence for the joint dynamics of our variables as drivers of the imbalances and provide further evidence for different hypotheses of Global Imbalances. The results suggest that shocks to US’ real GDP, real stock prices and the oil price are of particular importance for international trade balances and may thus be interpreted as support for parts of the global saving glut hypothesis as well as the international wealth channel.
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