Investment and Current Account Dynamics in an Open Economy Status Seeking Framework
In this paper we analyze the implications of status-preference, modelled as relative wealth, for the current account in a small open economy framework with capital stock dynamics. We demonstrate that the transitional dynamics of the economy is characterized by two distinct speeds of adjustment: a speed of adjustment arising from status-preference and a speed of adjustment arising from installation costs of investment. This structure implies that the current account balance depends on both speeds of adjustment as well as on the long-run equilibrium, which is a function of the degree of status-consciousness. As a consequence, the current account can exhibit non-monotonic behavior in transition to the steady-state equilibrium.
|Date of creation:||Feb 2002|
|Contact details of provider:|| Postal: Josefstädterstr. 39, A-1080 Vienna, Austria|
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at
More information through EDIRC
|Order Information:|| Postal: Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Layard, Richard, 1980. "Human Satisfactions and Public Policy," Economic Journal, Royal Economic Society, vol. 90(363), pages 737-750, December.
- Ogaki, M & Reinhart, C-M, 1995.
"Measuring Intertemporal Substitution : The Role of Durable Goods,"
RCER Working Papers
404, University of Rochester - Center for Economic Research (RCER).
- Masao Ogaki & Carmen M. Reinhart, 1998. "Measuring Intertemporal Substitution: The Role of Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1078-1098, October.
- Reinhart, Carmen & Ogaki, Masao, 1995. "Measuring intertemporal substitution: The role of durable goods," MPRA Paper 13690, University Library of Munich, Germany.
- Michael J. Boskin & Eytan Sheshinski, 1978. "Optimal Redistributive Taxation When Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 589-601.
- Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December.
- Rauscher, Michael, 1997. "Protestant Ethic, Status Seeking, and Economic Growth," Thuenen-Series of Applied Economic Theory 09, University of Rostock, Institute of Economics.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Gene M. Grossman (ed.), 1996. "Economic Growth," Books, Edward Elgar Publishing, volume 0, number 553.
- Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July.
- Partha Sen & Stephen J. Turnovsky, 1988.
"Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy,"
NBER Working Papers
2781, National Bureau of Economic Research, Inc.
- Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-831, November.
- Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
- Sen, P. & Turnovsky, S.J., 1990.
"Investment Tax Credit In An Open Economy,"
Discussion Papers in Economics at the University of Washington
90-09, Department of Economics at the University of Washington.
- Sen, P. & Turnovsky, S.J., 1990. "Investment Tax Credit In An Open Economy," Working Papers 90-09, University of Washington, Department of Economics.
- Partha Sen & Stephen J. Turnovsky, 1990. "Investment Tax Credit in an Open Economy," NBER Working Papers 3298, National Bureau of Economic Research, Inc.
- Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
- Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-399, June.
- Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
- Sen, Partha & Turnovsky, Stephen J., 1989.
"Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect,"
Journal of International Economics,
Elsevier, vol. 26(3-4), pages 227-250, May.
- Partha Sen & Stephen J. Turnovsky, 1988. "Deterioration of the Terms of Trade and Capital Accumulation: A Reexamination of the Laursen-Metzler Effect," NBER Working Papers 2616, National Bureau of Economic Research, Inc.
- Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
- Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, September.
When requesting a correction, please mention this item's handle: RePEc:ihs:ihsesp:110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Szoncsitz)
If references are entirely missing, you can add them using this form.