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Accounting for Global Dispersion of Current Accounts

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  • Yongsung Chang

    ()
    (University of Rochester)

  • Sun-Bin Kim

    ()
    (Department of Economics, Korea University)

  • Jaewoo Lee

    ()
    (International Monetary Fund)

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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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 548.

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Length: 33 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:roc:rocher:548

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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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Keywords: Distribution of Current Account; Incomplete Markets; Frictions.;

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References

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Citations

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Cited by:
  1. Jörg Decressin & Emil Stavrev, 2009. "Current Accounts in a Currency Union," IMF Working Papers 09/127, International Monetary Fund.
  2. Luca Fornaro, 2012. "International debt deleveraging," Economics Working Papers 1401, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2013.
  3. Peeters, Marga, 2010. "The changing pattern in international trade and capital flows of the Gulf cooperation council countries in comparison with other oil-exporting countries," MPRA Paper 23539, University Library of Munich, Germany.
  4. Marga Peeters, 2010. "The changing pattern of international trade and capital flows of the GCC countries," European Economy - Economic Papers 415, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  5. Damiano Sandri, 2011. "Precautionary Savings and Global Imbalances in World General Equilibrium," IMF Working Papers 11/122, International Monetary Fund.

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