Determinants of External Imbalances: The Role Taxes, Government Spending and Productivity

Leonardo Leiderman and Assaf Razin

No 3738, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops and estimates a dynamic optimizing model of the current account. The model focuses, on real factors that determine the evolution of saving and investment, and hence the external balance. Three types of shocks are at the center of the analysis: productivity shocks, shocks to labor input, and tax policy shocks. While our approach is in line with the real business cycle models of the current account, the distinguishing feature of the work is the application of econometric methods to time series data for a small open economy so as to directly estimate the parameters governing saving and investment under rational expectations restrictions.

Date: 1991-06
Note: ITI EFG IFM
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Citations: View citations in EconPapers (11)

Published as Journal of the Japanese and International Economies, Vol. 5, pp. 421-450, ( December 1991).

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Journal Article: Determinants of external imbalances: The role of taxes, government spending, and productivity (1991)
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