Growth and the Current Account in a Small Open Economy
The authors provide a framework with which to analyze growth in a small economy with perfect capital mobility. The framework provides a diagrammatic representation of steady states that differs in interesting and important ways from the usual closed-economy Solow-Swan diagram. The authors use the key diagrams to illustrate the effects of changes in parameters such as the saving rate and productivity growth on steady-state values of macroeconomic aggregates. They compare the steady-state results for the open economy with those obtained using the more familiar closed-economy model. They illustrate the possibility of endogenous income growth.
Volume (Year): 33 (2002)
Issue (Month): 2 (June)
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