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Net Foreign Asset Positions and Consumption Dynamics in the International Economy

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  • International Monetary Fund

Abstract

We examine the effect of non-zero, long-run foreign asset positions on consumption dynamics in response to productivity shocks in a two-country, dynamic, general equilibrium model, with different discount factors across countries populated by overlapping generations of households. We then compare the model results to those of a VAR for the United States versus the rest of the G-7. In the data, we find that permanent worldwide productivity shocks lead to net foreign asset and consumption dynamics that are consistent with interpreting the United States as the impatient economy in our model and are not consistent with symmetric models with equal discount factors.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/82.

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Length: 33
Date of creation: 01 Apr 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/82

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Keywords: Productivity; foreign assets; net foreign assets; foreign asset; net foreign asset; foreign asset positions; net foreign asset positions; foreign asset accumulation; foreign asset position; foreign goods; foreign counterpart; net foreign asset position; international trade; foreign liabilities; international lending; exchange rates; financial markets; foreign good; trade barriers; international financial;

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