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Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits

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Author Info
Taiji Harashima (University of Tsukuba & Cabinet Office of Japan)

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Abstract

The paper explores the impacts of heterogeneity in degree of relative risk aversion on the balance on current account in a two-country endogenous growth model. It concludes that, like the heterogeneity of demographic changes, the heterogeneity in degree of relative risk aversion generates persisting current account deficits. The deficit continues permanently, but its ratio to output stabilizes. With evidence that the degree of relative risk aversion in Japan is relatively higher than that in the U.S., there is a possibility that the persisting bilateral trade deficit of the U.S. with Japan is partially generated by this mechanism.

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File URL: http://129.3.20.41/eps/it/papers/0502/0502001.pdf
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Publisher Info
Paper provided by EconWPA in its series International Trade with number 0502001.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 43 pages
Date of creation: 01 Feb 2005
Date of revision: 10 Feb 2005
Handle: RePEc:wpa:wuwpit:0502001

Note: Type of Document - pdf; pages: 43
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Web page: http://129.3.20.41

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Related research
Keywords: Current account; Trade deficits; Capital flows; Endogenous growth; Risk aversion;

Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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This page was last updated on 2009-12-9.

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