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Accounting for Global Dispersion of Current Accounts

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  • Jaewoo Lee
  • Yongsung Chang
  • Sun-Bin Kim

Abstract

We undertake a quantitative analysis of the dispersion of current accounts in an open economy version of incomplete insurance model, incorporating important market frictions in trade and financial flows. Calibrated with conventional parameter values, the stochastic stationary equilibrium of the model with limited borrowing can account for about two-thirds of the global dispersion of current accounts. The easing of financial frictions can explain nearly all changes in the current account dispersion in the past four decades whereas the easing of trade frictions has almost no impact on the current account dispersion.

Suggested Citation

  • Jaewoo Lee & Yongsung Chang & Sun-Bin Kim, 2009. "Accounting for Global Dispersion of Current Accounts," IMF Working Papers 09/276, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/276
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    Cited by:

    1. Kim, Soyoung & Lee, Jaewoo, 2015. "Imbalances over the Pacific," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 173-185.
    2. Marga PEETERS, 2011. "The Changing Pattern in International Trade and Capital Flows of the Gulf Cooperation Council Countries in Comparison with other Oil-Exporting Countries," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(7), pages 1-29, December.
    3. Damiano Sandri, 2011. "Precautionary Savings and Global Imbalances in World General Equilibrium," IMF Working Papers 11/122, International Monetary Fund.
    4. Luca Fornaro, 2012. "International debt deleveraging," Economics Working Papers 1401, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2016.
    5. Marga Peeters, 2010. "The changing pattern of international trade and capital flows of the GCC countries," European Economy - Economic Papers 2008 - 2015 415, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Ricardo Reyes-Heroles, 2017. "The Role of Trade Costs in the Surge of Trade Imbalances," 2017 Meeting Papers 212, Society for Economic Dynamics.
    7. Fogli, Alessandra & Perri, Fabrizio, 2015. "Macroeconomic volatility and external imbalances," Journal of Monetary Economics, Elsevier, vol. 69(C), pages 1-15.
    8. Atish R. Ghosh & Mahvash S Qureshi & Charalambos G Tsangarides, 2014. "Friedman Redux; External Adjustment and Exchange Rate Flexibility," IMF Working Papers 14/146, International Monetary Fund.
    9. Christopher Andrew Hartwell, 2014. "Capital Controls and the Determinants of Entrepreneurship," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(6), pages 434-456, December.
    10. repec:eee:inecon:v:111:y:2018:i:c:p:143-158 is not listed on IDEAS
    11. Jörg Decressin & Emil Stavrev, 2009. "Current Accounts in a Currency Union," IMF Working Papers 09/127, International Monetary Fund.

    More about this item

    Keywords

    Economic models; External shocks; Current account; Cross country analysis; Capital transactions; Consumer goods; International capital markets; International trade; International financial system; Distribution of Current Account; Incomplete Markets; Frictions; current accounts; current account imbalances; current account balances; current account deficit;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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