Arbeitspapier
Current account dynamics under information rigidity and imperfect capital mobility
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 consumption. The RE model extended with imperfect capital mobility by Shibata and Shintani (1998) can account for persistent changes in consumption, but only at the cost of the explanatory power for the volatility of the current account. This paper replaces RE in the intertemporal current account model with sticky information (SI) in which consumers are inattentive to shocks to their income and infrequently adjust their consumption. The SI model can better explain a persistent and volatile current account than the RE model but it overpredicts the persistence of changes in consumption. The SI model extended with imperfect capital mobility almost fully explains current account dynamics and the persistence of changes in consumption, if high degrees of information rigidity and imperfect capital mobility are taken into account.
- Language
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Englisch
- Bibliographic citation
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Series: ISER Discussion Paper ; No. 1036
- Classification
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Wirtschaft
Macroeconomics: Consumption; Saving; Wealth
International Investment; Long-term Capital Movements
Current Account Adjustment; Short-term Capital Movements
Open Economy Macroeconomics
- Subject
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Capital mobility
Imperfect information
Inattentiveness
Permanent income hypothesis
- Event
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Geistige Schöpfung
- (who)
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Shibata, Akihisa
Shintani, Mototsugu
Tsuruga, Takayuki
- Event
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Veröffentlichung
- (who)
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Osaka University, Institute of Social and Economic Research (ISER)
- (where)
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Osaka
- (when)
-
2018
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Shibata, Akihisa
- Shintani, Mototsugu
- Tsuruga, Takayuki
- Osaka University, Institute of Social and Economic Research (ISER)
Time of origin
- 2018
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Price rigidity, the mark-up and the dynamics of the current account
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Current account dynamics and capital mobility in Asian small economies
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Imperfect Mobility
Price rigidity, the mark-up and the dynamics of the current account
Price rigidity, the mark-up and the dynamics of the current account
Downward Wage Rigidity and Job Mobility
Downward wage rigidity and labour mobility
Current account dynamics and capital mobility in Asian small economies
Current Account Policies
Unit root tests of the current account balance : implications for international capital mobility
Unit root tests of the current account balance : implications for international capital mobility
International Capital Mobility and Current Account Targeting in Central and Eastern European Countries
Unit root tests of the current account balance: implications for international capital mobility