Status Seeking in the Small Open Economy

Fisher, Walter H. and Hof, Franz X. (October 2001) Status Seeking in the Small Open Economy. IHS Economics Series 106


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Abstract: In our modified version of the small open economy Ramsey model, we assume that agents have preferences over consumption and status which, in turn, is determined by relative wealth. This extension potentially eliminates the standard model'scounterfactual result that an impatient country over time mortgages all of its capital and labor income. We show that the steady-state values of net assets and consumption, the speed of convergence and, in particular, the direction of adjustment during the transition depend crucially upon the degree of status consciousness. The latter also influences the economy's response to macro-economic shocks.;

Item Type: IHS Series
Keywords: 'Status seeking' 'Relative wealth' 'Open economy dynamics'
Classification Codes (e.g. JEL): E21, F41
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 02 Aug 2018 11:42

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