The Role of Stock Markets in Current Account Dynamics: A Time Series Approach

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Price:  $15.00

Author/Editor: Benoît Mercereau
Release Date: © March, 2004
ISBN : 978-1-45184-700-0
Stock #: WPIEA0502004
English
Stock Status: Available

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Description

This paper develops a simple model to study the impact of stock markets on the current account. A closed-form solution for the current account is derived from the optimal portfolio and consumption/saving choices of a representative agent. Formally, the model can be seen as a stock market-augmented version of the "fundamental equation of the current account" popularized by Jeffrey Sachs. It appears to shed light on recent developments in the U.S. current account deficit. The model also shows how the current account may help predict future stock market performance and/or endowment streams.

Taxonomy

Balance of payments , Current account




More publications in this series: Working Papers


More publications by: Benoît Mercereau