Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits
AbstractThe 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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Bibliographic InfoPaper provided by EconWPA in its series International Trade with number 0502001.
Length: 43 pages
Date of creation: 01 Feb 2005
Date of revision: 10 Feb 2005
Note: Type of Document - pdf; pages: 43
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Current account; Trade deficits; Capital flows; Endogenous growth; Risk aversion;
Other versions of this item:
- Harashima, Taiji, 2009. "Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits," MPRA Paper 19385, University Library of Munich, Germany.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-DEV-2005-04-16 (Development)
- NEP-INT-2005-04-16 (International Trade)
- NEP-MAC-2005-04-16 (Macroeconomics)
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