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Net Foreign Asset Positions and Consumption Dynamics in the International Economy

Author/Editor: Ghironi, Fabio | Iscan, Talan B. | Rebucci, Alessandro
Authorized for Distribution: April 1, 2005
Electronic Access: Free Full Text (PDF file size is 790KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We examine the effect of non-zero, long-run foreign asset positions on consumption dynamics in response to productivity shocks in a two-country, dynamic, general equilibrium model, with different discount factors across countries populated by overlapping generations of households. We then compare the model results to those of a VAR for the United States versus the rest of the G-7. In the data, we find that permanent worldwide productivity shocks lead to net foreign asset and consumption dynamics that are consistent with interpreting the United States as the impatient economy in our model and are not consistent with symmetric models with equal discount factors.
 
Series: Working Paper No. 05/82
Subject(s): Terms of trade | International trade | Consumption | Productivity | Economic models
Author's keyword(s): Net foreign assets | consumption | consumption tilting | productivity
 
English  
    Published:   April 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005082   Pages:   33
    Price:   US$15.00
       
     
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