Imports, Status Preference, and Foreign Borrowing
This paper considers the implications of consumption and borrowing externalities in a small open economy framework. The former reflect the assumption that status conscious agents care about the relative consumption of imported goods, while the latter arise because agents do not take into account the effects of their borrowing decisions on the interest rate on debt. We analyze in the paper the impact of an increase in the degree of status preference on the saddlepath adjustment of the decentralized economy. In addition, the contrasting steadystate and dynamic properties of the social planner's economy are derived, along with the corresponding optimal tax and subsidy policies.
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- Walter H. Fisher, 2004.
"Status Preference, Wealth and Dynamics in the Open Economy,"
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- Oswald, A.J., 1997. "Happiness and Economic Performance," Papers 18, Centre for Economic Performance & Institute of Economics.
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- Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1, December.
- Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, November.
- Bhandari, Jagdeep S. & Ul Haque, Nadeem & Turnovsky, Stephen J., 1989. "Growth, debt, and sovereign risk in a small, open economy," Policy Research Working Paper Series 260, The World Bank.
- 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.
- Frank, Robert H, 1997. "The Frame of Reference as a Public Good," Economic Journal, Royal Economic Society, vol. 107(445), pages 1832-1847, November.
- Fisher, Walter H & Terrell, Dek, 2000. "World Interest Shocks, Capital, and the Current Account," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 261-274, May.
- Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
- Fisher, Walter H. & Hof, Franz X., 2000. "Relative Consumption and Endogenous Labour Supply in the Ramsey Model: Do Status-Conscious People Work Too Much?," Economics Series 85, Institute for Advanced Studies. Full references (including those not matched with items on IDEAS)
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