Accounting for global dispersion of current accounts

Yongsung Chang; Sun Bin Kim; Jaewoo Lee

doi:10.1016/j.red.2012.09.007

Accounting for global dispersion of current accounts

Yongsung Chang, Sun Bin Kim, Jaewoo Lee

Department of Economics

Research output: Contribution to journal › Article

3 Citations (Scopus)

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.

Original language	English
Pages (from-to)	477-496
Number of pages	20
Journal	Review of Economic Dynamics
Volume	16
Issue number	3
DOIs	https://doi.org/10.1016/j.red.2012.09.007
Publication status	Published - 2013 Jul 1

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All Science Journal Classification (ASJC) codes

Economics and Econometrics

Cite this

Chang, Y., Kim, S. B., & Lee, J. (2013). Accounting for global dispersion of current accounts. Review of Economic Dynamics, 16(3), 477-496. https://doi.org/10.1016/j.red.2012.09.007

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Access to Document

10.1016/j.red.2012.09.007