A General-Equilibrium Intertemporal Model of an Open Economy

John Chipman and Guoqiang Tian

Economic Theory, 1992, vol. 2, issue 2, 215-46

Abstract: This paper develops a very general (general-equilibrium) intertemporal model of a country engaged.in international trade which can be used to address a wide variety of issues of interest in particular, econometric application--under the assumption that prices of tradable commodities (consumer goods and capital goods) and the interest rate are exogenous to the country. It allows for an arbitrarily large number of commodities which are distinguished into seven categories and for finite or infinite periods of time. This model can be used to draw various policy conclusions. We investigate how current net imports, the balance of payments on current account, current consumption expenditure, next-period bondholdings, current wealth, and current internal prices will react to exogenous changes in current external prices, the current interest rate, current taxes, current factor endowments, and current-period bondholdings. This paper also considers the integrability of net-import demand functions.

Date: 1992
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