The present value model of the current account has been very popular, as it provides an optimal benchmark to which actual current account series have often been compared. We show why persistence in observed current account data makes the estimated optimal series very sensitive to small-sample...

The present value model of the current account has been very popular, as it provides an optimal benchmark to which actual current account series have often been compared. We show why persistence in observed current account data makes the estimated optimal series very sensitive to small-sample...

We develop an N-country model with stock markets in which closed-form solutions for the real exchange rate is derived. Our model allows for a given number of risky-assets, which form an incomplete market. Risky asset prices and allocations of risky assets among countries are determined...