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Accounting for Global Dispersion of Current Accounts

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  • Yongsung Chang

    (University of Rochester)

  • Sun-Bin Kim

    (Yonsei University)

  • Jaewoo Lee

    (International Monetary Fund)

Abstract

We develop a multi-country quantitative model of the global distribution of current account and external balances. Countries accumulate domestic capital and foreign assets to smooth consumption over time against exogenous productivity shocks in the presence of liquidity constraints. In equilibrium, optimal consumption and investment responses to persistent productivity shocks imply a degree of intertemporal substitution across countries that can explain up to one-third of the current account dispersion in the data. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2012.09.007
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

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Handle: RePEc:red:issued:10-170

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Keywords: Dispersion of current accounts; Incomplete markets; Frictions;

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References

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Citations

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Cited by:
  1. Peeters, Marga, 2010. "The changing pattern in international trade and capital flows of the Gulf cooperation council countries in comparison with other oil-exporting countries," MPRA Paper 23539, University Library of Munich, Germany.
  2. Damiano Sandri, 2011. "Precautionary Savings and Global Imbalances in World General Equilibrium," IMF Working Papers 11/122, International Monetary Fund.
  3. Marga Peeters, 2010. "The changing pattern of international trade and capital flows of the GCC countries," European Economy - Economic Papers 415, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Jörg Decressin & Emil Stavrev, 2009. "Current Accounts in a Currency Union," IMF Working Papers 09/127, International Monetary Fund.

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