A New Perspective on “The New Rule” Of the CurrentAccount

In an in‡uential series of contributions, Kraay and Ventura (2000, 2003) o¤er a“new rule” for the current account: in response to a temporary income shock, thechange in the current account is equal to the change in saving times the ratio of netforeign assets to wealth. We analyze the impact of a temporary income shock onthe current account in the context of a two-country dynamic general equilibriummodel of portfolio choice and show that the new rule does not hold.[...]

MoreLess

Year of publication:	2009-06-09
Authors:	Tille, Cédric ; Van Wincoop, Eric
Institutions:	Swiss National Centre of Competence in Research North South <Bern>
Subject:	Internationale Kapitalbewegung \| capital flows \| Kontokorrent \| Dynamisches Gleichgewicht \| Dynamic Equilibrium \| Einkommen \| income

Check Google Scholar |

More access options

In German libraries (KVK)

I need help

1 Introduction
2 A Two-Country General Equilibrium Model
2.1 Production and Investment
2.2 Two Assets
2.3 Consumption and Portfolio Choice
2.4 Solution Method
3 Current Account Response to Temporary IncomeShocks
3.1 Dynamic Response of the Economy
3.2 Why Does the New Rule Not Hold?
3.3 Intertemporal versus Portfolio Theory of the CurrentAccount
4 What Accounts for the Cross-Section Evidenceby Kraay and Ventura?
5 Are There Di¤erent Models Where the NewRule Does Hold?
6 Conclusion
Appendix
References

Persistent link: https://www.econbiz.de/10005868717