Current Account Dynamics in a Small Open Economy Model of Status Seeking

Fisher, Walter H. (October 2001) Current Account Dynamics in a Small Open Economy Model of Status Seeking. IHS Economics Series 107

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Abstract or Table of Contents

Abstract: In this paper we will use a status-preference framework, together with a standard cost of adjustment investment function, to study the dynamics of the small open economy current account balance. We demonstrate that the transitional dynamics of the economy is characterized by two speeds of adjustment: a speed of adjustment arising from status-preference and a speed of adjustment arising from installation costs of investment. This structure implies that the current account balance depends on both speeds of adjustment as well as on the long-run equilibrium. As a consequence, the current account can exhibit non-monotonic behavior in transition to the steady state.;

Item Type: IHS Series
Keywords: 'Current account' '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: 21 Jul 2017 06:32
URI: http://irihs.ihs.ac.at/id/eprint/1378

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