This paper reexamines the consistency of the permanent income hypothesis with aggregate, post-war, United States data. The permanent income hypothesis is nested within a more general model in which a fraction of income accrues to individuals who consume their current income rather than their...

Using panel data for a sample of households in Utah from 1850 to 1900 we find income and wealth age profiles that are concave and that have a peak within the age distribution of the relevant sample. This finding holds for cross sections at five-year intervals, for pooled cross section...

We study the effects of debt-financed fiscal transfers in a general equilibrium, heterogeneous-agent model of the world economy. In the long run, increases in government debt anywhere raise the world interest rate and increase private wealth everywhere. In the short run, a country with a...

This paper provides a formal analysis of the current account balance in a dynamic model with optimizing agents. Two analytical ideas are stressed. First, an economy's current account balance depends as much on fixture economic trends as on the current economic environment. A shift in fiscal...

This paper develops a dynamic framework in which macroeconomic liberalization and stabilization measures of the type recently seen in Latin America can be studied. The model is sufficiently general to cover both polar cases of a closed capital account and free private capital mobility, so the...

There are a number of worrisome features of the U.S. current account deficit. In particular, its size and persistence, the extent to which it is financing consumption as opposed to investment, and the reliance on debt inflows raise concerns about the likelihood of a sharp adjustment. We examine...

This paper re-examines the implications, risks, and attendant policies surrounding global rebalancing of current accounts through the lens of a dynamic, multi-region model of the global economy. In the baseline scenario, world macroeconomic imbalances of the early 2000s can be attributed to a...

The paper uses an intertemporal perfect-foresight optimizing model to analyze the effect of transitory terms-of-trade shocks on a small open . economy's current-account and utility time profiles. An adverse terms-of-trade shift known to be temporary induces the economy to run down its stock of...

This paper provides an historical perspective on the recent behavior of the U.S. trade deficit. Judged by U.S. historical experience, the trade deficit has reached what is now unprecedented levels. That unprecedented deficit has its principal source not in changes in market structure affecting...