Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits

Taiji Harashima

MPRA Paper from University Library of Munich, Germany

Abstract: The paper examines the impacts of heterogeneity in the degree of relative risk aversion on the balance on current account in the framework of endogenous growth, and concludes that, like heterogeneity in demographic changes, heterogeneity in the degree of relative risk aversion generates persisting current account imbalances. The imbalance continues permanently, but its ratio to outputs stabilizes. With evidence in many empirical studies that the degree of relative risk aversion in Japan is relatively higher than that in the U.S., the paper argues that the persisting bilateral trade deficit of the U.S. with Japan is partially generated by this mechanism.

Keywords: Current account; Trade deficits; Capital flows; Endogenous growth; Risk aversion (search for similar items in EconPapers)
JEL-codes: E10 F21 F41 F43 O40 (search for similar items in EconPapers)
Date: 2009-12-16
New Economics Papers: this item is included in nep-dge, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/19515/1/MPRA_paper_19515.pdf revised version (application/pdf)

Related works:
Working Paper: Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19385

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