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Intergenerational and International Trade

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  • Rudiger Dornbusch

Abstract

The paper sets out an overlapping generations model in an open economy context. In the absence of productive capital a real consol is the vehicle for intertemporal consumption smoothing. The presence of a long term asset implies that the anticipated future path of the economy, through the term structure of interest, affects current generations. The model is applied to issues in the closed and open economy. These include the effects of debt issue on asset prices and welfare, the effect of present or anticipated future income growth, permanent or transitory. In the open economy context we investigate the welfare and current account effects of income changes on debt issue. The role of international differences in risk aversion is studied.

Suggested Citation

  • Rudiger Dornbusch, 1981. "Intergenerational and International Trade," NBER Working Papers 0792, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0792
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    Cited by:

    1. Frode Brevik & Manfred Gärtner, 2006. "Macroeconomic effects of banking secrecy when tax evasion is endogenous," University of St. Gallen Department of Economics working paper series 2006 2006-10, Department of Economics, University of St. Gallen.
    2. Shuanglin Lin & Wei Zhang, 1998. "Welfare Effects of Capital Taxation in a Small Open Economy," Open Economies Review, Springer, vol. 9(1), pages 5-20, January.
    3. Dornbusch, Rudiger, 1983. "Real Interest Rates, Home Goods, and Optimal External Borrowing," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 141-153, February.
    4. Persson, Torsten, 1985. "Deficits and intergenerational welfare in open economies," Journal of International Economics, Elsevier, vol. 19(1-2), pages 67-84, August.
    5. Meir Kohn & Nancy Marion, 1992. "The Implications of Knowledge-Based Growth for the Optimality of Open Capital Markets," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 865-883, November.
    6. Jung Young-Cheol & Quyen Nguyen V., 2012. "The Global Transmission of Government Debt," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-24, July.
    7. M. Ayhan Kose & Prakash Loungani & Marco E. Terrones, 2013. "From the Global to the National Cycle: An Intricate Liaison," Pacific Economic Review, Wiley Blackwell, vol. 18(3), pages 370-402, August.
    8. Persson, Torsten & Svensson, Lars E O, 1985. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 43-65, February.
    9. Lin, Shuanglin, 1999. "Tax reform and external balance," Journal of International Money and Finance, Elsevier, vol. 18(6), pages 891-909, December.
    10. Ntokozo Patrick Nzimande & Marcel Kohler, 2016. "On the Validity of Purchasing Power Parity: Evidence from Energy Exporting Sub-Saharan Africa Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 71-82, July-Sept.
    11. Shuanglin Lin, 1998. "Taxing Consumption in an Open Economy," Public Finance Review, , vol. 26(3), pages 250-269, May.

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