Consumption-Based Interest Rate and the Present-Value Model of the Current Account

Consumption-Based Interest Rate and the Present-Value Model of the Current Account—Evidence from Nigeria

August 1, 2001

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

This paper presents a model of current account determination, based upon the permanent-income hypothesis. A present-value relationship among the current account, changes in net output, the exchange rate and the terms of trade is derived and the implications of such a relationship are tested using data for Nigeria during 1960-97. This paper presents a model of current account determination, based upon the permanent-income hypothesis. A present-value relationship among the current account, changes in net output, the exchange rate and the terms of trade is derived and the implications of such a relationship are tested using data for Nigeria during 1960-97.

Subject: Balance of payments, Consumption, Current account, Current account balance, Financial services, International trade, National accounts, Real interest rates, Terms of trade

Keywords: Consumption, consumption expenditure, consumption-based interest rate, Current account, Current account balance, current account determination, Global, interest rate, model of the current account, Nigeria, optimal current account, Present-value model, Real interest rates, Terms of trade, terms of trade change, unintended terms of trade shock, utility function, world interest rate, WP

Pages:
29
Volume:
2001
DOI:
https://doi.org/10.5089/9781451851656.001
Issue:
093
Series:
Working Paper No. 2001/093
Stock No:
WPIEA0932001
ISBN:
9781451851656
ISSN:
1018-5941

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