We use a two-good dynamic intertemporal general equilibrium model to formalize the economic intuition of Krugman about the explanation of the J-curve phenomenon in terms of habit persistence in consumption and sluggishness in capital adjustment. The results differ markedly according to the...

Most of empirical studies find evidence of the J-Curve, but recent results cast doubt over its standard explanation. By addressing the countercyclicality of the current account and its dynamic link with the terms of trade, this paper revisits the J-Curve phenomenon using a two-good dynamic...

We develop a three-country, stock-flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances. Each country has a household sector and a non-household (corporate) sector. The household sector is...

The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in...

The current account in developed countries is highly persistent and volatile in comparison to their output growth. The standard intertemporal current account model with rational expectations (RE) fails to explain the observed current account and consumption dynamics. The RE model extended with...

The permanent income hypothesis implies that frictionless open economies with exhaustible natural resources should save abroad most of their resource windfalls and, therefore, feature current account surpluses. Resource-rich developing countries (RRDCs), on the other hand, face substantial...

The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in...

The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in...

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...

Using a dynamic stochastic general equilibrium (DSGE) model, we examine the impact of anticipated and unanticipated terms of trade (ToT) shocks on aggregate output, inflation and the trade balance (TB). This allows us to offer an alternative explanation of the J-curve phenomenon. We find that an...