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

Taiji Harashima

International Trade from University Library of Munich, Germany

Abstract: The paper explores the impacts of heterogeneity in degree of relative risk aversion on the balance on current account in a two-country endogenous growth model. It concludes that, like the heterogeneity of demographic changes, the heterogeneity in degree of relative risk aversion generates persisting current account deficits. The deficit continues permanently, but its ratio to output stabilizes. With evidence that the degree of relative risk aversion in Japan is relatively higher than that in the U.S., there is a possibility that the persisting bilateral trade deficit of the U.S. with Japan is partially generated by this mechanism.

Keywords: Current account; Trade deficits; Capital flows; Endogenous growth; Risk aversion (search for similar items in EconPapers)
JEL-codes: E10 F21 F41 F43 O40 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2005-02-01, Revised 2005-04-20
New Economics Papers: this item is included in nep-dev, nep-int and nep-mac
Note: Type of Document - pdf; pages: 43
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0502/0502001.pdf (application/pdf)

Related works:
Working Paper: Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpit:0502001

Access Statistics for this paper

More papers in International Trade from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).