Accounting for Global Dispersion of Current Accounts

Yongsung Chang, Sun-Bin Kim and Jaewoo Lee
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Jaewoo Lee: International Monetary Fund

No 2012rwp-44, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: We develop a multi-country quantitative model of the global distribution of current account and external balances. Countries accumulate domestic capital and foreign assets to smooth consumption over time against exogenous productivity shocks in the presence of liquidity constraints. In equilibrium, optimal consumption and investment responses to persistent productivity shocks imply a degree of intertemporal substitution across countries that can explain up to one-third of the current account dispersion in the data.

Keywords: Dispersion of Current Accounts; Incomplete Markets; Frictions (search for similar items in EconPapers)
JEL-codes: F32 F34 F44 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-09
New Economics Papers: this item is included in nep-dge and nep-opm
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Related works:
Journal Article: Accounting for Global Dispersion of Current Accounts (2013)
Working Paper: Accounting for Global Dispersion of Current Accounts (2009)
Working Paper: Accounting for Global Dispersion of Current Accounts (2009)
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