Short-Run Analysis of Income Fluctuation and Optimum Foreign Borrowing in the Bardhan-Pitchford Model
AbstractThis paper utilizes the technique developed by Kenneth Judd to quantify the short-run effects of temporal income falls on the current account. It is found that (a) for both a fixed time discount rate and an endogenous discount rate, a future, temporal fall in income improves the initial current account; (b) with a current income fall and with no future income change, the initial current account deteriorates; (c) but when a current income fall is combined with a future income fall, the effect on the initial current account is ambiguous.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 433.
Length: 13 pages
Date of creation: 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-21 (All new papers)
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