IDEAS home Printed from
   My bibliography  Save this paper

Saving and Investment in an Open Economy with Non-Traded Goods


  • Charles Engel
  • Kenneth Kletzer


We examine a model of a small open economy in which there is free international mobility of financial capital, investment in capital goods and a non-traded good. Such an environment is rich enough to explain several phenomena that are inexplicable in more barren models. We suggest an explanation of why saving and investment may be correlated even with no restrictions on trade in assets. We explain why a high saving country may nonetheless borrow from abroad to finance investment. We also provide an optimizing model of stages in the balance of payments.

Suggested Citation

  • Charles Engel & Kenneth Kletzer, 1987. "Saving and Investment in an Open Economy with Non-Traded Goods," NBER Working Papers 2141, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2141
    Note: ITI IFM

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 769-797, August.
    2. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1142-1161, December.
    3. Jeffrey A. Frankel, 1985. "International capital mobility and crowding-out in the U.S. economy: imperfect integration of financial markets or of goods markets?," Proceedings, Federal Reserve Bank of St. Louis, pages 33-74.
    4. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    5. Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
    6. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-594, June.
    7. Bazdarich, Michael J., 1978. "Optimal growth and stages in the balance of payments," Journal of International Economics, Elsevier, vol. 8(3), pages 425-443, August.
    8. Martin Feldstein, 1991. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 331-353 National Bureau of Economic Research, Inc.
    9. Obstfeld, Maurice, 1986. "Capital mobility in the world economy: Theory and measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 55-103, January.
    10. Fischer, Stanley & Frenkel, Jacob A., 1972. "Investment, the two-sector model and trade in debt and capital goods," Journal of International Economics, Elsevier, vol. 2(3), pages 211-233, August.
    11. Charles Engel & Kenneth M. Kletzer, 1986. "International Borrowing to Finance Investment," NBER Working Papers 1865, National Bureau of Economic Research, Inc.
    12. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2141. 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: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.