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The Dynamic-Optimizing Approach to the Current Account: Theory and Evidence

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Assaf Razin

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Abstract

The organization of this paper is as follows. Section I builds an empirically implementable model of the current account. Likewise, Section II derives the essential time series properties of the real exchange rate. Positive implications of the intertemporal approach against panel and international cross section data are analyzed in Section III. Section IV brings out evidence relevant for the normative implications of the intertemporal approach, highlighting the role of taxes and incentives, capital controls, and convergence of growth rates. Section V concludes.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4334.

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Date of creation: Jul 1995
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Handle: RePEc:nbr:nberwo:4334

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Find related papers by JEL classification:
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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  1. Reuven Glick & Kenneth Rogoff, 1992. "Global Versus Country-Specific Productivity Shocks and the Current Account," NBER Working Papers 4140, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Leiderman, Leonardo & Razin, Assaf, 1991. "Determinants of external imbalances: The role of taxes, government spending, and productivity," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 421-450, December. [Downloadable!] (restricted)
  3. Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, vol. 13(1), pages 55-57. [Downloadable!] (restricted)
  4. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August. [Downloadable!] (restricted)
    Other versions:
  5. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September. [Downloadable!] (restricted)
  6. Maurice Obstfeld, 1986. "Capital Mobility in the World Economy: Theory and Measurement," NBER Working Papers 1692, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Assaf Razin & Andrew Rose, 1994. "Business Cycle Volatility and Openness: An Exploratory Cross-Section Analysis," NBER Working Papers 4208, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Rebelo, Sérgio, 1992. "Growth in Open Economies," CEPR Discussion Papers 667, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Kenneth Rogoff, 1992. "Traded Goods Consumption Smoothing and the Random Walk Behavior of the Real Exchange Rate," NBER Working Papers 4119, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Rabelo, S., 1992. "Inflation in Fixed Exchange Rate Regimes: The Recent Portuguese Experience," Papers 517, Stockholm - International Economic Studies.
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(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. Claudia Canals & Xavier Gabaix & Josep M. Vilarrubia & David Weinstein, 2007. "Trade patterns, trade balances and idiosyncratic shocks," Banco de España Working Papers 0721, Banco de España. [Downloadable!]
  2. Ugur Ciplak, 2007. "Real Exchange Rate Fluctuations and Relative Prices in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 7(2), pages 29-48. [Downloadable!]
  3. Dr Anthony J. Makin, 2003. "Feasible Limits For External Deficits And Debt," Discussion Papers Series 321, School of Economics, University of Queensland, Australia. [Downloadable!]
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  4. Lau, Evan & Baharumshah, Ahmad Zubaidi & Habibullah, Muzafar Shah, 2007. "Accounting for the Current Account Behavior in ASEAN-5," MPRA Paper 1322, University Library of Munich, Germany. [Downloadable!]
  5. Takashi Kano, 2003. "A Structural VAR Approach to the Intertemporal Model of the Current Account," Working Papers 03-42, Bank of Canada. [Downloadable!]
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  6. Kraay, Aart & Ventura, Jaume, 1995. "Trade and fluctuations," Policy Research Working Paper Series 1560, The World Bank. [Downloadable!]
  7. Paul Cashin & C. McDermott, 2002. "Terms of Trade Shocks and the Current Account: Evidence from Five Industrial Countries," Open Economies Review, Springer, vol. 13(3), pages 219-235, July. [Downloadable!] (restricted)
  8. Jinill Kim & Yun-kwong Kwok, 2007. "Higher-Order Properties of the ‘Exchange Rate Dynamics Redux’ Model," Computational Economics, Springer, vol. 30(4), pages 371-380, November. [Downloadable!] (restricted)
  9. Selahattin Dibooglu, 1995. "Accounting for U.S. Current Account Deficits: An Empirical Investigation," International Finance 9502003, EconWPA. [Downloadable!]
    Other versions:
  10. Calderon, Cesar & Loayza, Norman & Serven, Luis, 2000. "External sustainability : a stock equilibrium perspective," Policy Research Working Paper Series 2281, The World Bank. [Downloadable!]
  11. César Calderón & Norman Loayza & Luis Servén, 2001. "International Portfolio Diversification: The Role of Risk and Return," Working Papers Central Bank of Chile 94, Central Bank of Chile. [Downloadable!]
  12. F. Gerard Adams & Byron Gangnes, 2000. "Will Japan's Current Account Turn to Deficit?," Working Papers 200010, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
  13. Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Iñaki Erauskin-Iurrita, 2009. "The current account and the new rule in a not-so-small open economy," Investigaciones Economicas, Fundación SEPI, vol. 33(3), pages 529-557, September. [Downloadable!]
  15. Chadha, J. S. & Janssen, N. & Nolan, C.Author-X-Name-First: C., 2001. "Productivity and Preferences in a Small Open Economy," Cambridge Working Papers in Economics 0108, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  16. MANUCHEHR IRANDOUST & BOO SJÖÖ, 2000. "The Behavior Of The Current Account In Response To Unobservable And Observable Shocks," International Economic Journal, Korean International Economic Association, vol. 14(4), pages 41-57, December. [Downloadable!] (restricted)
  17. Lucio Sarno & Mark Taylor, 1998. "Exchange controls, international capital flows and saving-investment correlations in the UK: An empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(1), pages 69-98, March. [Downloadable!] (restricted)
  18. Ventura, Jaume, 2002. "Towards a Theory of Current Accounts," CEPR Discussion Papers 3545, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  19. Kumah, F.Y., 1996. "Common stochastic trends in the current account," Discussion Paper 84, Tilburg University, Center for Economic Research. [Downloadable!]
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