Current Account and Budget Deficits in an Intertemporal Model of Consumption and Taxation Smoothing PDF Download
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Author: Nouriel Roubini
Publisher:
ISBN:
Category : Balance of payments
Languages : en
Pages : 68
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Book Description
This paper presents an infinite horizon model of consumption and taxation " smoothing" that implies a simple relation between current accounts, budget deficits, investment rates and transitory output shocks. It is argued that such a model could explain the "Feldstein-Horioka puzzle" of the apparent lack of international capital mobility. Traditional regressions of the savings rate on the investment rate, as performed in the literature, are shown to be incorrect tests of the hypothesis of capital mobility because they do not control for the independent role of budget deficits and temporary output shocks in the current account and savings equations. Empirical tests of the model for a sample of 18 OECD countries present good evidence that international capital markets are widely integrated and that the "Feldstein-Horioka puzzle" might be explained by the important role of fiscal deficits in the determination of the current account and the saving behavior.
Author: Nouriel Roubini
Publisher:
ISBN:
Category : Balance of payments
Languages : en
Pages : 68
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Book Description
This paper presents an infinite horizon model of consumption and taxation " smoothing" that implies a simple relation between current accounts, budget deficits, investment rates and transitory output shocks. It is argued that such a model could explain the "Feldstein-Horioka puzzle" of the apparent lack of international capital mobility. Traditional regressions of the savings rate on the investment rate, as performed in the literature, are shown to be incorrect tests of the hypothesis of capital mobility because they do not control for the independent role of budget deficits and temporary output shocks in the current account and savings equations. Empirical tests of the model for a sample of 18 OECD countries present good evidence that international capital markets are widely integrated and that the "Feldstein-Horioka puzzle" might be explained by the important role of fiscal deficits in the determination of the current account and the saving behavior.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Nouriel Roubini
Publisher:
ISBN:
Category :
Languages : es
Pages : 52
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Book Description
Author: Mr.Paul Cashin
Publisher: International Monetary Fund
ISBN: 1451940238
Category : Business & Economics
Languages : en
Pages : 18
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Book Description
This paper estimates a simple consumption-smoothing model of the French current account, and examines its capacity to predict recent developments in France’s external performance. The model views the current account as a buffer through which private agents can smooth consumption over time in response to temporary disturbances to output, investment, and government expenditure. The empirical results indicate that the model performs well overall, and predicts correctly the sharp turnaround in France’s external accounts observed in the past three years—a feature of the data that conventional models of trade flows, based on income and relative price variables, appear unable to explain.
Author: Daniel Valente Dantas
Publisher:
ISBN:
Category : Budget
Languages : en
Pages : 40
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Book Description
This paper investigates the implications of government deficits in an overlapping generations consumption loan model with longterm assets. The only asset in the economy is a real consol issued by the government and serviced by lumpsum taxes on the young. We explore here the time path of short and longterm interest rates following the announcement of a future,transitory budget deficit under two alternative assumptions. In one case the deficit arises from transitory government spending, in the other case from a transfer.We show that a deficit policy ultimately raises longterm interest rates and lowers consol prices. The exact shape of the path of short-term rates depends on the source of the deficit and on the saving response to interestrates. In general, though, the term structure will be v-shaped. The interest of the model resides in the fact that the prices of longterm assets link the current generations to future disturbances. Because future disturbances affect future interest rates they affect the current value of debt outstanding and hence equilibrium short-term rates. The exact manner in which the disturbances are transmitted to prior periods depends on the extent to which consumers substitute easily across time or, on the contrary, have a strong preference for consumption smoothing.
Author: Bharat Trehan
Publisher:
ISBN:
Category : Budget deficits
Languages : en
Pages : 60
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Book Description
Author: Michael R. Wickens
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 25
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Book Description
Author: International Monetary Fund. Research Dept.
Publisher: International Monetary Fund
ISBN: 1451956770
Category : Business & Economics
Languages : en
Pages : 228
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Book Description
A central proposition regarding effects of different mechanisms of fi-nancing public expenditures is that, under specific circumstances, it makes no difference to the level of aggregate demand if the government finances its outlays by debt or taxation. This so-called Ricardian equivalence states that, for a given expenditure path, substitution of debt for taxes does not affect private sector wealth and consumption. This paper provides a model illustrating the implications of Ricardian equivalence, surveys the litera-ture, considers effects of relaxing the basic assumptions, provides a frame-work to study implications of various extensions, and critically reviews recent empirical work on Ricardian equivalence.
Author: Leonardo Leiderman
Publisher: Cambridge University Press
ISBN: 9780521454384
Category : Business & Economics
Languages : en
Pages : 400
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Book Description
This edited volume examines capital mobility in both industrialised and developing countries.
Author: Stephanie Schmitt-Grohé
Publisher: Princeton University Press
ISBN: 0691189544
Category : Business & Economics
Languages : en
Pages : 483
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Book Description
An essential introduction to one of the most timely and important subjects in economics International Macroeconomics presents a rigorous and theoretically elegant treatment of real-world international macroeconomic problems, incorporating the latest economic research while maintaining a microfounded, optimizing, and dynamic general equilibrium approach. This one-of-a-kind textbook introduces a basic model and applies it to fundamental questions in international economics, including the determinants of the current account in small and large economies, processes of adjustment to shocks, the determinants of the real exchange rate, the role of fixed and flexible exchange rates in models with nominal rigidities, and interactions between monetary and fiscal policy. The book confronts theoretical predictions using actual data, highlighting both the power and limits of given theories and encouraging critical thinking. Provides a rigorous and elegant treatment of fundamental questions in international macroeconomics Brings undergraduate and master’s instruction in line with modern economic research Follows a microfounded, optimizing, and dynamic general equilibrium approach Addresses fundamental questions in international economics, such as the role of capital controls in the presence of financial frictions and balance-of-payments crises Uses real-world data to test the predictions of theoretical models Features a wealth of exercises at the end of each chapter that challenge students to hone their theoretical skills and scrutinize the empirical relevance of models Accompanied by a website with lecture slides for every chapter
