In this article, we study the co-movement of the government budget balance and the trade balance at business-cycle frequencies. In a sample of 10 OECD countries we find that the correlation of the two time series is negative, but less so in more open economies. Moreover, for the U.S. the...

This paper analyzes the cross-country effects of productivity and demand disturbances in the United States identified with sign restrictions based on standard theory. Productivity gains in US manufacturing increase US consumption and investment vis-à-vis foreign countries, resulting in a trade...