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The Current Account in the Eacroeconomic Adjustment Process

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  • Jeffrey D. Sachs

Abstract

This paper provides a formal analysis of the current account balance in a dynamic model with optimizing agents. Two analytical ideas are stressed. First, an economy's current account balance depends as much on fixture economic trends as on the current economic environment. A shift in fiscal policy, for example, will have one effect on the current account if it is perceived to be temporary and another if it is seen to be permanent. Second, temporary disturbances in the economy have permanent effects, by altering the entire future path of the economy's international indebtedness.

Suggested Citation

  • Jeffrey D. Sachs, 1981. "The Current Account in the Eacroeconomic Adjustment Process," NBER Working Papers 0796, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0796
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    References listed on IDEAS

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    1. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1142-1161, December.
    2. Jeffrey D. Sachs, 1981. "The Current Account and macroeconomic Adjustment in the 1970s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 201-282.
    3. Obstfeld, Maurice, 1980. "Intermediate imports, the terms of trade, and the dynamics of the exchange rate and current account," Journal of International Economics, Elsevier, vol. 10(4), pages 461-480, November.
    4. David Lipton & Jeffrey Sachs, 1980. "Accumulation and Growth in a Two-Country Model: A Simulation Approach," NBER Working Papers 0572, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Sahoo, Manoranjan & babu, M. Suresh & Dash, Umakant, 2016. "Current account sustainability in SAARC economies: Evidence from combined cointegration approach," MPRA Paper 79014, University Library of Munich, Germany, revised 2016.
    2. Kowalewski, Oskar & Pisany, Paweł, 2019. "What drove the growth of the corporate bond markets in Asia?," Research in International Business and Finance, Elsevier, vol. 48(C), pages 365-380.
    3. Sahoo, Manoranjan & Babu, M. Suresh & Dash, Umakant, 2016. "Long run sustainability of current account balance of China and India: New evidence from combined cointegration test," MPRA Paper 79013, University Library of Munich, Germany, revised 2016.
    4. Francisco Rosende & Roberto Toso, 1984. "Una Explicación para la Tasa de Interés Real en Chile en el Período 1975-1983," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 21(62), pages 25-36.
    5. Jeffrey Sachs & Daniel Cohen, 1982. "LDC Borrowing with Default Risk," NBER Working Papers 0925, National Bureau of Economic Research, Inc.
    6. Manuel Bengolea & Francisco Rosende, 1984. "Teoría de los Ciclos y la Crisis Económica Actual," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 21(63), pages 207-226.
    7. Richard H. Clarida, 1984. "Current Account, Exchange Rate, and Monetary Dynamics in a Stochastic Equilibrium Model," Cowles Foundation Discussion Papers 694, Cowles Foundation for Research in Economics, Yale University.
    8. Das, Debasish Kumar, 2012. "Determinants of current account imbalances in the global economy: A dynamic panel analysis," MPRA Paper 42419, University Library of Munich, Germany.

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