Net Foreign Asset Positions and Consumption Dynamics in the International Economy

Author/Editor:

International Monetary Fund

Publication Date:

April 1, 2005

Electronic Access:

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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:

English

Publication Date:

April 1, 2005

ISBN/ISSN:

9781451861013/1018-5941

Stock No:

WPIEA2005082

Format:

Paper

Pages:

33

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