IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpit/0502001.html
   My bibliography  Save this paper

Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits

Author

Listed:
  • Taiji Harashima

    (University of Tsukuba & Cabinet Office of Japan)

Abstract

The paper explores the impacts of heterogeneity in degree of relative risk aversion on the balance on current account in a two-country endogenous growth model. It concludes that, like the heterogeneity of demographic changes, the heterogeneity in degree of relative risk aversion generates persisting current account deficits. The deficit continues permanently, but its ratio to output stabilizes. With evidence that the degree of relative risk aversion in Japan is relatively higher than that in the U.S., there is a possibility that the persisting bilateral trade deficit of the U.S. with Japan is partially generated by this mechanism.

Suggested Citation

  • Taiji Harashima, 2005. "Endogenous Growth Models in Open Economies: A Possibility of Permanent Current Account Deficits," International Trade 0502001, University Library of Munich, Germany, revised 20 Apr 2005.
    • Handle: RePEc:wpa:wuwpit:0502001
    Note: Type of Document - pdf; pages: 43
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0502/0502001.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
    2. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 495-525.
    3. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799, Elsevier.
    4. Ghiglino, Christian, 2002. "Introduction to a General Equilibrium Approach to Economic Growth," Journal of Economic Theory, Elsevier, vol. 105(1), pages 1-17, July.
    5. Farmer, Roger E.A. & Lahiri, Amartya, 2005. "Recursive preferences and balanced growth," Journal of Economic Theory, Elsevier, vol. 125(1), pages 61-77, November.
    6. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
    7. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    8. Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
    9. Faruqee, Hamid & Muhleisen, Martin, 2003. "Population aging in Japan: demographic shock and fiscal sustainability," Japan and the World Economy, Elsevier, vol. 15(2), pages 185-210, April.
    10. James M. Poterba, 2001. "Demographic Structure And Asset Returns," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 565-584, November.
    11. Robin Brooks, 2003. "Population Aging and Global Capital Flows in a Parallel Universe," IMF Staff Papers, Palgrave Macmillan, vol. 50(2), pages 1-3.
    12. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    13. Szpiro, George G., 1986. "Relative risk aversion around the world," Economics Letters, Elsevier, vol. 20(1), pages 19-21.
    14. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague.
    15. Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(2), pages 375-382.
    16. Nicholas Kaldor, 1961. "Capital Accumulation and Economic Growth," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, chapter 0, pages 177-222, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Harashima, Taiji, 2015. "Why Has the U.S. Current Account Deficit Persisted? International Sustainable Heterogeneity under Floating Exchange Rates," MPRA Paper 67177, University Library of Munich, Germany.
    2. Harashima, Taiji, 2012. "Sustainable Heterogeneity as the Unique Socially Optimal Allocation for Almost All Social Welfare Functions," MPRA Paper 40938, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harashima, Taiji, 2009. "Trade Liberalization and Heterogeneous Rates of Time Preference across Countries: A Possibility of Trade Deficits with China," MPRA Paper 19386, University Library of Munich, Germany.
    2. Harashima, Taiji, 2010. "Sustainable Heterogeneity: Inequality, Growth, and Social Welfare in a Heterogeneous Population," MPRA Paper 22521, University Library of Munich, Germany.
    3. Harashima, Taiji, 2010. "An Asymptotically Non-Scale Endogenous Growth Model," MPRA Paper 26025, University Library of Munich, Germany.
    4. Harashima, Taiji, 2016. "Live and Let Live: Sustainable Heterogeneity Will Generally Prevail," MPRA Paper 71887, University Library of Munich, Germany.
    5. Patrizio Pagano & Massimo Sbracia, 2014. "The secular stagnation hypothesis: a review of the debate and some insights," Questioni di Economia e Finanza (Occasional Papers) 231, Bank of Italy, Economic Research and International Relations Area.
    6. Braunerhjelm, Pontus & Borgman, Benny, 2006. "Agglomeration, Diversity and Regional Growth," Working Paper Series in Economics and Institutions of Innovation 71, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    7. Taiji HARASHIMA, 2014. "Sustainable Heterogeneity In Exogenous Growth Models. The Socially Optimal Distribution By Government’S Intervention," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 5(1), pages 73-100.
    8. Harashima, Taiji, 2015. "Why Has the U.S. Current Account Deficit Persisted? International Sustainable Heterogeneity under Floating Exchange Rates," MPRA Paper 67177, University Library of Munich, Germany.
    9. Zoltan J. Acs & David B. Audretsch & Pontus Braunerhjelm & Bo Carlsson, 2005. "Growth and Entrepreneurship: An Empirial Assessment," Papers on Entrepreneurship, Growth and Public Policy 2005-32, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    10. Harashima, Taiji, 2014. "The Representative Household Assumption Requires sustainable Heterogeneity in Dynamic Models," MPRA Paper 57520, University Library of Munich, Germany.
    11. Kapetanios, George & Millard, Stephen & Price, Simon & Petrova, Katerina, 2018. "Time varying cointegration and the UK Great Ratios," Essex Finance Centre Working Papers 23320, University of Essex, Essex Business School.
    12. Jerbashian Vahagn, 2016. "Knowledge licensing in a model of R&D-driven endogenous growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 555-579, June.
    13. Adriana Di Liberto, 2007. "Convergence and Divergence in Neoclassical Growth Models with Human Capital," Economia politica, Società editrice il Mulino, issue 2, pages 289-322.
    14. Reto Foellmi & Josef Zweim�ller, "undated". "Structural Change and the Kaldor Facts of Economic Growth," IEW - Working Papers 111, Institute for Empirical Research in Economics - University of Zurich.
    15. Alexander Ludwig & Dirk Krüger & Axel Börsch-Supan, 2009. "Demographic Change, Relative Factor Prices, International Capital Flows, and Their Differential Effects on the Welfare of Generations," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 385-414, National Bureau of Economic Research, Inc.
    16. Krueger, Dirk & Ludwig, Alexander, 2007. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 49-87, January.
    17. Eaton, Jonathan & Kortum, Samuel, 1997. "Engines of growth: Domestic and foreign sources of innovation," Japan and the World Economy, Elsevier, vol. 9(2), pages 235-259, May.
    18. Martin Zagler & Georg Dürnecker, 2003. "Fiscal Policy and Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 397-418, July.
    19. Paul Lau, Sau-Him, 1999. "I(0) In, integration and cointegration out:: Time series properties of endogenous growth models," Journal of Econometrics, Elsevier, vol. 93(1), pages 1-24, November.
    20. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.

    More about this item

    Keywords

    Current account; Trade deficits; Capital flows; Endogenous growth; Risk aversion;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpit:0502001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.