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Weakly non-separable preferences and the Harberger-Laursen-Metzler effect

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Author Info
Shinsuke Ikeda

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Abstract

We examine the current account effect of a terms-of-trade deterioration for a small country model, incorporating weakly non-separable preferences à la Shi (1994) under endogenous time preference. This enables us to emphasize a welfare change as an important determinant of the current account. Even with increasing marginal impatience, the Harberger-Laursen-Metzler effect occurs if consumers' preference toward imports is sufficiently wealth enhanced: in that case a terms-of-trade deterioration must reduce steady-state welfare to shift preference away from imports to exports. Several empirical implications are also derived.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 34 (2001)
Issue (Month): 1 (February)
Pages: 290-307
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Handle: RePEc:cje:issued:v:34:y:2001:i:1:p:290-307

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Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. CARDI, Oliver & BERTINELLI, Luisito, 2004. "A formal model of krugmanÕs intuition on the J-curve," CORE Discussion Papers 2004043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  2. Schubert, Stefan Franz, 2009. "Dynamic Effects of Oil Price Shocks and their Impact on the Current Account," MPRA Paper 16738, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-12-21.

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