The Current Account in the Eacroeconomic Adjustment Process

Jeffrey D. Sachs

NBER Working Paper No. 796
Issued in November 1981
NBER Program(s):International Trade and Investment, International Finance and Macroeconomics

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.

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Document Object Identifier (DOI): 10.3386/w0796

Published: Scandanavian Journal of Economics Volume 84, No. 2, 1982

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