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Accounting for Global Dispersion of Current Accounts

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  • Yongsung Chang

    (University of Rochester and Yonsei University)

  • Sun-Bin Kim

    (Yonsei University)

  • Jaewoo Lee

    (International Monetary Fund)

Abstract

We develop a multi-country quantitative model of the global distribution of current account and external balances. Countries accumulate domestic capital and foreign assets to smooth consumption over time against exogenous productivity shocks in the presence of liquidity constraints. In equilibrium, optimal consumption and investment responses to persistent productivity shocks imply a degree of intertemporal substitution across countries that can explain up to one-third of the current account dispersion in the data.

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Bibliographic Info

Paper provided by Yonsei University, Yonsei Economics Research Institute in its series Working papers with number 2012rwp-44.

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Length: 50 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:yon:wpaper:2012rwp-44

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Keywords: Dispersion of Current Accounts; Incomplete Markets; Frictions;

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References

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Citations

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Cited by:
  1. 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.
  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. Jörg Decressin & Emil Stavrev, 2009. "Current Accounts in a Currency Union," IMF Working Papers 09/127, International Monetary Fund.
  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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