This paper extends the analytical framework provided by Glick and Rogoff (JME 1995) to an economy with traded and nontraded goods, and it analyzes the impact of country-specific and global productivity shocks on the current account and investment that are largely consistent with the empirical...

The joint behavior of investment and the current account is derived as a triangular simultaneous equations model. To estimate this model for the G7 countries, we propose a full-information GLS estimator for panel data that extends Zellner-Theil three-stage least squares estimator and allows for...