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Consumption tilting and the current account: Evidence from Canada

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  • Braeu, Rebecca

Abstract

This paper estimates the consumption tilting motive in Canada. A common empirical technique (vector-error correction model) is applied to a well-established theory (the small-open economy present-value model) in order to estimate the long-run behavior of the current account. The results suggest that households are patient. They modify intertemporal consumption profiles in order to tilt consumption toward the future through the accumulation of wealth, which improves the current account in the long run.

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  • Braeu, Rebecca, 2010. "Consumption tilting and the current account: Evidence from Canada," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 304-312, April.
    • Handle: RePEc:eee:reveco:v:19:y:2010:i:2:p:304-312
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    Cited by:

    1. Thomas McGregor, 2019. "Pricing Sovereign Debt in Resource-Rich Economies," IMF Working Papers 2019/240, International Monetary Fund.
    2. Chen, Shyh-Wei, 2011. "Are current account deficits really sustainable in the G-7 countries?," Japan and the World Economy, Elsevier, vol. 23(3), pages 190-201.
    3. Thomas McGregor, 2017. "Pricing sovereign debt in resource rich economies," OxCarre Working Papers 194, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

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