The intertemporal current account approach predicts that the current account of a small open economy is independent of global shocks, and that responses of the current account to country-specific shocks depend on the persistence of the shocks. This paper shows that these predictions impose...

The intertemporal current account approach predicts that the current account of a small open economy is independent of global shocks, and that responses of the current account to country-specific shocks depend on the persistence of the shocks. This paper shows that these predictions impose...

We use a dynamic general-equilibrium model to study how removing barriers to competition in the nontraded goods sector affects the current account of a small open economy. We show that the expansion of the nontraded sector that results from such a "deregulation shock" is associated with an...

This paper studies how removing barriers to competition in the nontraded goods sector affects the current account, the real exchange rate, and factor prices in a small open economy. We show that the expansion of the nontraded sector that results from a "deregulation shock" is associated with an...

The evidence of the last 20 years of recurring output busts and rapid reversals of the current account in emerging markets indicates that domestic agents may not be able to borrow in international capital markets to fully insure themselves against internal and external shocks. This paper models...

The impact of an unanticipated monetary shock in a small open economy with dollarization, factor price rigidities, and nontradeables is re-examined in an optimizing intertemporal general equilibrium model. The framework of an earlier study is extended to incorporate foreign real money balances...

This paper examines the relationship between terms of trade shocks, private saving, and the current account position. The relationship between these variables is theoretically ambiguous: an adverse transitory terms of trade shock can either induce a deterioration or an improvement in the current...