Net Foreign Asset Positions and Consumption Dynamics in the International Economy

Publication Date:

April 1, 2005

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 2005/082

Subject:

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

English

Publication Date:

April 1, 2005

ISBN/ISSN:

9781451861013/1018-5941

Stock No:

WPIEA2005082

Pages:

33

Please address any questions about this title to publications@imf.org