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Imports, Status Preference, and Foreign Borrowing

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Author Info
Fisher, Walter H. (Department of Economics and Finance, Institute for Advanced Studies, Vienna)

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Abstract

This paper considers the implications of consumption and borrowing externalities in a small open economy framework. The former reflect the assumption that status conscious agents care about the relative consumption of imported goods, while the latter arise because agents do not take into account the effects of their borrowing decisions on the interest rate on debt. We analyze in the paper the impact of an increase in the degree of status preference on the saddlepath adjustment of the decentralized economy. In addition, the contrasting steadystate and dynamic properties of the social planner's economy are derived, along with the corresponding optimal tax and subsidy policies.

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File URL: http://www.ihs.ac.at/publications/eco/es-161.pdf
File Format: application/pdf
File Function: First version, 2004
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 161.

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Length: 33 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:ihs:ihsesp:161

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Related research
Keywords: Imports; Status-preference; Current account 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
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  1. Bhandari, Jagdeep S. & Ul Haque, Nadeem & Turnovsky, Stephen J., 1989. "Growth, debt, and sovereign risk in a small, open economy," Policy Research Working Paper Series 260, The World Bank. [Downloadable!]
  2. Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  3. Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July. [Downloadable!] (restricted)
  4. Walter H. Fisher, 2004. "Status Preference, Wealth and Dynamics in the Open Economy," German Economic Review, Blackwell Publishing, vol. 5(3), pages 335-355, 08. [Downloadable!] (restricted)
    Other versions:
  5. Fisher, Walter H., 1995. "An optimizing analysis of the effects of world interest disturbances on the open economy term structure of interest rates," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 105-126, February. [Downloadable!] (restricted)
  6. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, January.
  7. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-16, March. [Downloadable!] (restricted)
  8. Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, vol. 107(445), pages 1832-47, November. [Downloadable!] (restricted)
  9. Fisher, Walter H & Terrell, Dek, 2000. "World Interest Shocks, Capital, and the Current Account," Review of International Economics, Blackwell Publishing, vol. 8(2), pages 261-74, May. [Downloadable!] (restricted)
  10. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, September.
    Other versions:
    • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, September.
  11. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December. [Downloadable!] (restricted)
  12. Fisher, Walter H. & Hof, Franz X., 2000. "Relative Consumption and Endogenous Labour Supply in the Ramsey Model: Do Status-Conscious People Work Too Much?," Economics Series 85, Institute for Advanced Studies. [Downloadable!]
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