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Accounting for Global Dispersion of Current Accounts

Author/Editor: Chang, Yongsung | Kim, Sun-Bin | Lee, Jaewoo
Authorized for Distribution: December 1, 2009
Electronic Access: Free Full Text (PDF file size is 917KB)
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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 undertake a quantitative analysis of the dispersion of current accounts in an open economy version of incomplete insurance model, incorporating important market frictions in trade and financial flows. Calibrated with conventional parameter values, the stochastic stationary equilibrium of the model with limited borrowing can account for about two-thirds of the global dispersion of current accounts. The easing of financial frictions can explain nearly all changes in the current account dispersion in the past four decades whereas the easing of trade frictions has almost no impact on the current account dispersion.
 
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Series: Working Paper No. 09/276
Subject(s): Capital transactions | Consumer goods | Cross country analysis | Current account | Economic integration | Economic models | External shocks | International capital markets | International financial system | International trade
Author's keyword(s): Distribution of Current Account | Incomplete Markets | Frictions
 
English  
    Published:   December 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009276   Pages:   33
    Price:   US$18.00
       
     
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