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Status Preference, Wealth, and Dynamics in the Open Economy

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

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Abstract

The implications of status preference in a simple open economy model will be investigated in this paper. The open economy is modeled as a continuum of identical representative agents who have preferences over consumption and status. In the paper status is identified as relative wealth, which takes the form of relative holdings international financial assets. A symmetric macroeconomic equilibrium is derived in which status is the source of transitional dynamics for consumption and the current account balance. This result illustrates another way to generate transitional dynamics in the small open economy model, which, as is well-known, does not have well-defined dynamics under perfect capital mobility. The role of status plays in influencing the open economy's adjustment to various macroeconomic shocks is also considered.

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File URL: http://www.ihs.ac.at/publications/eco/es-99.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 99.

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Length: 25 pages
Date of creation: Apr 2001
Date of revision:
Handle: RePEc:ihs:ihsesp:99

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Related research
Keywords: Status-preference; Open economy dynamcis;

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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.:

  1. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January. [Downloadable!] (restricted)
  2. 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)
  3. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, January.
  4. 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)
  5. Obstfeld, Maurice, 1990. "Intertemporal dependence, impatience, and dynamics," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 45-75, August. [Downloadable!] (restricted)
    Other versions:
  6. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-31, November. [Downloadable!] (restricted)
    Other versions:
  7. 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)
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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. Walter H. Fisher, 2004. "Durable Consumption As A Status Good: A Study Of Neoclassical Cases," Computing in Economics and Finance 2004 96, Society for Computational Economics. [Downloadable!]
  3. Fisher, Walter H. & Heijdra, Ben J., 2007. "Keeping up with the Ageing Joneses," Economics Series 204, Institute for Advanced Studies. [Downloadable!]
    Other versions:
  4. Cecilia García-Peñalosa & Stephen Turnovsky, 2008. "Consumption externalities: a representative consumer model when agents are heterogeneous," Economic Theory, Springer, vol. 37(3), pages 439-467, December. [Downloadable!] (restricted)
  5. Ryu-ichiro Murota & Yoshiyasu Ono, 2008. "Growth, Stagnation and Status Preference," ISER Discussion Paper 0715, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  6. Fisher, Walter H. & Hof, Franz X., 2005. "The Quest for Status and Endogenous Labor Supply. The Relative Wealth Framework," Economics Series 181, Institute for Advanced Studies. [Downloadable!]
    Other versions:
  7. Duernecker, Georg, 2007. "Growth Effects of Consumption Jealousy in a Two-Sector Model," Economics Series 201, Institute for Advanced Studies. [Downloadable!]
  8. Fisher, Walter H. & Hof, Franz X., 2001. "Status Seeking in the Small Open Economy," Economics Series 106, Institute for Advanced Studies. [Downloadable!]
    Other versions:
  9. Fisher, Walter H., 2004. "Imports, Status Preference, and Foreign Borrowing," Economics Series 161, Institute for Advanced Studies. [Downloadable!]
    Other versions:
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