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Accounting for Global Dispersion of Current Accounts

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  • Jaewoo Lee
  • Yongsung Chang
  • Sun-Bin Kim

Abstract

We undertake a quantitative analysis of the dispersion of current accounts in an open economy version of incomplete insurance model, incorporating important market frictions in trade and financial flows. Calibrated with conventional parameter values, the stochastic stationary equilibrium of the model with limited borrowing can account for about two-thirds of the global dispersion of current accounts. The easing of financial frictions can explain nearly all changes in the current account dispersion in the past four decades whereas the easing of trade frictions has almost no impact on the current account dispersion.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/276.

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Length: 33
Date of creation: 01 Dec 2009
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Handle: RePEc:imf:imfwpa:09/276

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Keywords: Capital transactions; Consumer goods; Economic models; External shocks; current account; current accounts; current account imbalances; current account balances; current account deficit; current account deficits; current account surpluses; global current account imbalances; global current account; current account dynamics; current account balance; international lending; debt market; current account adjustment; balance of payments; international borrowing; highly indebted countries; sovereign debt; current account reversals; balance of payments accounts; current account positions; indebted countries;

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Cited by:
  1. Jörg Decressin & Emil Stavrev, 2009. "Current Accounts in a Currency Union," IMF Working Papers, International Monetary Fund 09/127, International Monetary Fund.
  2. Marga PEETERS, 2011. "The Changing Pattern in International Trade and Capital Flows of the Gulf Cooperation Council Countries in Comparison with other Oil-Exporting Countries," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, ScientificPapers.org, vol. 1(7), pages 29, December.
  3. Marga Peeters, 2010. "The changing pattern of international trade and capital flows of the GCC countries," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 415, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Luca Fornaro, 2013. "International Debt Deleveraging," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 182, Oesterreichische Nationalbank (Austrian Central Bank).
  5. Damiano Sandri, 2011. "Precautionary Savings and Global Imbalances in World General Equilibrium," IMF Working Papers, International Monetary Fund 11/122, International Monetary Fund.

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