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Status Seeking in the Small Open Economy

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Author Info
Fisher, Walter H. (Department of Economics and Finance, Institute for Advanced Studies)
Hof, Franz X. (Institute of Economics, Vienna University of Technology)

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Abstract

In our modified version of the small open economy Ramsey model, we assume that agents have preferences over consumption and status which, in turn, is determined by relative wealth. This extension potentially eliminates the standard model's counterfactual result that an impatient country over time mortgages all of its capital and labor income. We show that the steady-state values of net assets and consumption, the speed of convergence and, in particular, the direction of adjustment during the transition depend crucially upon the degree of status consciousness. The latter also influences the economy's response to macro-economic shocks.

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File URL: http://www.ihs.ac.at/publications/eco/es-106.pdf
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File Function: First version, 2001
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 106.

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Length: 26, A-12 pages
Date of creation: Oct 2001
Date of revision:
Handle: RePEc:ihs:ihsesp:106

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Related research
Keywords: Status seeking; Relative wealth; Open economy dynamics;

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

References listed on IDEAS
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.:

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    Other versions:
Full references

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. Fisher, Walter H., 2001. "Current Account Dynamics in a Small Open Economy Model of Status Seeking," Economics Series 107, Institute for Advanced Studies. [Downloadable!]
    Other versions:
  2. Fisher, Walter H. & Heijdra, Ben J., 2007. "Keeping up with the Ageing Joneses," Economics Series 204, Institute for Advanced Studies. [Downloadable!]
    Other versions:
  3. Walter Fisher & F. Hof, 2008. "The quest for status and endogenous labor supply: the relative wealth framework," Journal of Economics, Springer, vol. 93(2), pages 109-144, March. [Downloadable!] (restricted)
    Other versions:
  4. Ulla Lehmijoki & Tapio Palokangas, 2009. "Population growth overshooting and trade in developing countries," Journal of Population Economics, Springer, vol. 22(1), pages 43-56, January. [Downloadable!] (restricted)
    Other versions:
  5. Michel Normandin & Martin Boileau, 2005. "Closing International Real Business Cycle Models with Restricted Financial Markets," Cahiers de recherche 05-03, HEC Montréal, Institut d'économie appliquée. [Downloadable!]
    Other versions:
  6. Jang-Ting Guo & Juin-Jen Chang, 2008. "Social Status and Optimal Income Taxation," Working Papers 200814, University of California at Riverside, Department of Economics, revised Dec 2008. [Downloadable!]
  7. Duernecker, Georg, 2007. "Growth Effects of Consumption Jealousy in a Two-Sector Model," Economics Series 201, Institute for Advanced Studies. [Downloadable!]
  8. Hung-Ju Chen & Jang-Ting Guo, 2009. "Money and Endogenous Growth in a Cash-in-Advance Model with Social Status," Working Papers 200906, University of California at Riverside, Department of Economics, revised Jun 2009. [Downloadable!]
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