Consumption Smoothing and the Current Account: Evidence for France, 1970-1994
November 1, 1995
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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
Pages:
18
Volume:
1995
DOI:
Issue:
119
Series:
Working Paper No. 1995/119
Stock No:
WPIEA1191995
ISBN:
9781451940237
ISSN:
1018-5941
