Saving and Investment in an Open Economy with Non-Traded Goods

Charles Engel and Kenneth Kletzer

No 2141, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine a model of a small open economy in which there is free international mobility of financial capital, investment in capital goods and a non-traded good. Such an environment is rich enough to explain several phenomena that are inexplicable in more barren models. We suggest an explanation of why saving and investment may be correlated even with no restrictions on trade in assets. We explain why a high saving country may nonetheless borrow from abroad to finance investment. We also provide an optimizing model of stages in the balance of payments.

Date: 1987-02
Note: ITI IFM
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Citations: View citations in EconPapers (8)

Published as International Economic Review, Volume 30, November 1989, pp. 735-752

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Journal Article: Saving and Investment in an Open Economy with Non-traded Goods (1989)
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