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Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits

  • Harashima, Taiji

The paper examines the impacts of heterogeneity in the degree of relative risk aversion on the balance on current account in the framework of endogenous growth, and concludes that, like heterogeneity in demographic changes, heterogeneity in the degree of relative risk aversion generates persisting current account imbalances. The imbalance continues permanently, but its ratio to outputs stabilizes. With evidence in many empirical studies that the degree of relative risk aversion in Japan is relatively higher than that in the U.S., the paper argues that the persisting bilateral trade deficit of the U.S. with Japan is partially generated by this mechanism.

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File URL: http://mpra.ub.uni-muenchen.de/19385/1/MPRA_paper_19385.pdf
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File URL: http://mpra.ub.uni-muenchen.de/19515/1/MPRA_paper_19515.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19385.

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Date of creation: 16 Dec 2009
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Handle: RePEc:pra:mprapa:19385
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  1. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799 Elsevier.
  2. Peretto, P. & Smulders, J.A., 2002. "Technological distance, growth and scale effects," Other publications TiSEM bdce08a7-4ad9-4427-a99e-f, School of Economics and Management.
  3. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  4. Farmer, Roger E.A. & Lahiri, Amartya, 2005. "Recursive preferences and balanced growth," Journal of Economic Theory, Elsevier, vol. 125(1), pages 61-77, November.
  5. Szpiro, George G., 1986. "Relative risk aversion around the world," Economics Letters, Elsevier, vol. 20(1), pages 19-21.
  6. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
  7. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
  8. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  9. Robin Brooks, 2003. "Population Aging and Global Capital Flows in a Parallel Universe," IMF Staff Papers, Palgrave Macmillan, vol. 50(2), pages 3.
  10. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  11. Faruqee, Hamid & Muhleisen, Martin, 2003. "Population aging in Japan: demographic shock and fiscal sustainability," Japan and the World Economy, Elsevier, vol. 15(2), pages 185-210, April.
  12. Ghiglino, Christian, 2002. "Introduction to a General Equilibrium Approach to Economic Growth," Journal of Economic Theory, Elsevier, vol. 105(1), pages 1-17, July.
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