Imports, Status Preference, and Foreign Borrowing

Walter Fisher

No 161, Economics Series from Institute for Advanced Studies

Abstract: This paper considers the implications of consumption and borrowing externalities in a small open economy framework. The former reflect the assumption that status conscious agents care about the relative consumption of imported goods, while the latter arise because agents do not take into account the effects of their borrowing decisions on the interest rate on debt. We analyze in the paper the impact of an increase in the degree of status preference on the saddlepath adjustment of the decentralized economy. In addition, the contrasting steadystate and dynamic properties of the social planner's economy are derived, along with the corresponding optimal tax and subsidy policies.

Keywords: Imports; Status-preference; Current account dynamics (search for similar items in EconPapers)
JEL-codes: E21 F41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2004-09
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https://irihs.ihs.ac.at/id/eprint/1591 First version, 2004 (application/pdf)

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Journal Article: Imports, Status Preference, and Foreign Borrowing (2008)
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