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Accounting for Global Dispersion of Current Accounts

Jaewoo Lee (), Yongsung Chang () and Sun-Bin Kim ()

No 09/276, IMF Working Papers from International Monetary Fund

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: Economic models; External shocks; Current account; Cross country analysis; Capital transactions; Consumer goods; International capital markets; International trade; International financial system; Distribution of Current Account, Incomplete Markets, Frictions, current accounts, current account imbalances, current account balances, current account deficit, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-opm
Date: 2009-12-01
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Related works:
Journal Article: Accounting for Global Dispersion of Current Accounts (2013) Downloads
Working Paper: Accounting for Global Dispersion of Current Accounts (2012) Downloads
Working Paper: Accounting for Global Dispersion of Current Accounts (2009) Downloads
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