Net Foreign Asset Positions and Consumption Dynamics in the International Economy

April 1, 2005

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Format: Chicago

Net Foreign Asset Positions and Consumption Dynamics in the International Economy, (USA: International Monetary Fund, 2005) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We examine the effect of non-zero, long-run foreign asset positions on consumption dynamics in response to productivity shocks in a two-country, dynamic, general equilibrium model, with different discount factors across countries populated by overlapping generations of households. We then compare the model results to those of a VAR for the United States versus the rest of the G-7. In the data, we find that permanent worldwide productivity shocks lead to net foreign asset and consumption dynamics that are consistent with interpreting the United States as the impatient economy in our model and are not consistent with symmetric models with equal discount factors.

Subject: Consumption, External position, Foreign assets, Labor, National accounts, Production, Productivity, Real wages

Keywords: Benchmark solution, Consumption, Consumption profile, Consumption tilting, Foreign assets, Global, Impulse response, Mover accent, Net foreign assets, Productivity, Productivity level, Productivity shock, Real wages, Steady state, Steady-state productivity differential, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/082
Stock No:

WPIEA2005082
ISBN:

9781451861013
ISSN:

1018-5941

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