Accounting for global dispersion of current accounts

Yongsung Chang, Sun Bin Kim, Jaewoo Lee

Research output: Contribution to journalArticle

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 languageEnglish
Pages (from-to)477-496
Number of pages20
JournalReview of Economic Dynamics
Volume16
Issue number3
DOIs
Publication statusPublished - 2013 Jul 1

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All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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