A Quantitative Examination of Current Account Dynamics in Equilibrium Models of Barter Economies

February 1, 1992

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Format: Chicago

Enrique G. Mendoza A Quantitative Examination of Current Account Dynamics in Equilibrium Models of Barter Economies, (USA: International Monetary Fund, 1992) accessed November 12, 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

This paper provides a numerical analysis of an intertemporal equilibrium model of a small open, barter economy that is subject to random shocks affecting endowments, the terms of trade, and the real interest rate. Equilibrium stochastic processes for macroeconomic aggregates are computed and their properties are compared with observed stylized facts. The model mimics the Harberger-Laursen-Metzler effect, but cannot account for a countercyclical trade balance, the variability of the real exchange rate, and the income elasticity of imports. The results also show that the correlation between the trade balance and the terms of trade, given incomplete insurance markets, is sensitive to changes in preference parameters and in the persistence of exogenous shocks.

Subject: Consumption, Financial markets, Imports, International trade, National accounts, Securities markets, Terms of trade, Trade balance

Keywords: Balance of trade, Consumption, Countercyclical trade balance, Cross-expenditure effect, Detrended trade balance, Imports, Real interest rate, Securities markets, Standard deviation, Terms of trade, Terms-of-trade disturbance, Terms-of-trade shock, Trade balance, Trade-balance behavior, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/014
Stock No:

WPIEA0141992
ISBN:

9781451924121
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 39, No. 4, December 1992.

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