TY - JOUR
T1 - Capital accumulation and the current account in a two-country model
AU - Devereux, Michael B.
AU - Shi, Shouyong
N1 - Funding Information:
*We are grateful to Larry Epstein for helpful discussions. The first author thanks the Social Sciences and Humanities Research Council of Canada for support, and the second author thanks the Donner Canadian Foundation for support. In addition the comments of a referee helped to improve the paper considerably. Remaining errors are due to us alone. ‘Buiter (1981) surveys this area and provides a list of references. %e, for instance, Backus and Kehoe (1987), Sachs (1981), Persson (1985). Kimbrough (1986). and Frenkel and Razin (1985, 1986) among others.
PY - 1991/2
Y1 - 1991/2
N2 - This paper examines the joint determination of international debt and capital accumulation in a two-country model. National rates of time preference are endogenous, adjusting along an optimal path to come into equality with one another in the steady state. The characteristics of short-run current account dynamics are crucially linked to world capital accumulation and to a country's long-run net external asset position. Steady-state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries. This gives rise to possible non-monotonic adjustment in the current account and consumption.
AB - This paper examines the joint determination of international debt and capital accumulation in a two-country model. National rates of time preference are endogenous, adjusting along an optimal path to come into equality with one another in the steady state. The characteristics of short-run current account dynamics are crucially linked to world capital accumulation and to a country's long-run net external asset position. Steady-state creditor countries tend to have current account surpluses during episodes of world output growth and vice versa for debtor countries. This gives rise to possible non-monotonic adjustment in the current account and consumption.
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U2 - 10.1016/0022-1996(91)90002-N
DO - 10.1016/0022-1996(91)90002-N
M3 - Article
AN - SCOPUS:0001976005
SN - 0022-1996
VL - 30
SP - 1
EP - 25
JO - Journal of International Economics
JF - Journal of International Economics
IS - 1-2
ER -