Intertemporal Price Speculation and the Optimal Current-Account Deficit: Reply and Clarification

In the model of Obstfeld (1983), a country hurt by a temporary shift in its terms of trade, whether the shift is infinitesimal or not, always runs a temporary current-account deficit. Temporary rises in relative export prices always cause surpluses in the model. This note derives these results within an analysis that clarifies how temporary terms-of-trade shocks affect the consumption-based real interest rate on external debt and, hence, the current account.


Issue Date:
1996-02
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/233425
PURL Identifier:
http://purl.umn.edu/233425
Total Pages:
19
JEL Codes:
F32; F41
Series Statement:
Working Paper
C96-063




 Record created 2017-04-01, last modified 2020-10-28

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)