Accounting for Global Dispersion of Current Accounts

Yongsung Chang (), Kim, Sun-Bin () and Jaewoo Lee ()
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Kim, Sun-Bin: Department of Economics, Korea University

No 548, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

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.

Keywords: Distribution of Current Account; Incomplete Markets; Frictions. (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge and nep-opm
Date: 2009-05
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