EconPapers    
Economics at your fingertips  
 

Net foreign asset positions and consumption dynamics in the international economy

Fabio Ghironi (), Talan Iscan () and Alessandro Rebucci ()

Journal of International Money and Finance, 2008, vol. 27, issue 8, 1337-1359

Abstract: We examine the effect of non-zero, steady-state foreign assets on consumption dynamics in response to productivity shocks in a two-country, dynamic, general equilibrium model. The model generates non-zero steady-state net foreign assets by allowing for different discount factors across countries. As a consequence of discounting differences, individual steady-state consumption profiles are tilted upward or downward. Worldwide shocks to long-run productivity levels lead to dynamics that are absent in standard, symmetric models with equal discount factors. We then compare the model results to those of a VAR in common trend representation for the U.S. versus the rest of the G7. In the data, we find that permanent worldwide productivity shocks lead to net foreign asset and consumption dynamics that are broadly consistent with interpreting the U.S. as the relatively impatient model economy and are not consistent with symmetric models with equal discount factors.

Keywords: Net; foreign; assets; Consumption; Consumption; tilting; Productivity (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261-5606(08)00114-9
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Net Foreign Asset Positions and Consumption Dynamics in the International Economy (2005) Downloads
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:eee:jimfin:v:27:y:2008:i:8:p:1337-1359

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-08-20
Handle: RePEc:eee:jimfin:v:27:y:2008:i:8:p:1337-1359