IMF Working Papers

Consumption Smoothing and the Current Account: Evidence for France, 1970-1994

By Claude Bismut, Paul Cashin, C. John McDermott, Pierre-Richard Agénor

November 1, 1995

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Claude Bismut, Paul Cashin, C. John McDermott, and Pierre-Richard Agénor. Consumption Smoothing and the Current Account: Evidence for France, 1970-1994, (USA: International Monetary Fund, 1995) accessed November 8, 2024
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 estimates a simple consumption-smoothing model of the French current account, and examines its capacity to predict recent developments in France’s external performance. The model views the current account as a buffer through which private agents can smooth consumption over time in response to temporary disturbances to output, investment, and government expenditure. The empirical results indicate that the model performs well overall, and predicts correctly the sharp turnaround in France’s external accounts observed in the past three years—a feature of the data that conventional models of trade flows, based on income and relative price variables, appear unable to explain.

Subject: Balance of payments, Consumption, Consumption distribution, Currencies, Current account, Current account balance, Money, National accounts

Keywords: Cash flow, Cash flow variable, Consumption, Consumption distribution, Consumption tilting, Consumption-smoothing model, Currencies, Current account, Current account act, Current account balance, Current account cat, Current account World interest rate, Interest cash flow, Utility function, WP

Publication Details

  • Pages:

    18

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1995/119

  • Stock No:

    WPIEA1191995

  • ISBN:

    9781451940237

  • ISSN:

    1018-5941

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