TY  - JOUR
AU  - Persson,Torsten
AU  - Svensson,Lars E.O.
TI  - Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1129
PY  - 1983
Y2  - May 1983
UR  - http://www.nber.org/papers/w1129
L1  - http://www.nber.org/papers/w1129.pdf
N1  - Author contact info:
Torsten Persson
Torsten and Ragnar Soderberg Chair in Economic Sci
Institute for International Economic Studies
Stockholm University
SE-106 91 Stockholm
SWEDEN
Tel: +46 8 163066
Fax: +46 8 6747801
E-Mail: Torsten.Persson@iies.su.se

Lars E.O. Svensson
Sveriges Riksbank
SE-103 37 Stockholm
SWEDEN
Tel: +46 8 787 0107
Fax: +46 8 21 0531
E-Mail: lars.svensson@iies.su.se
AB  - The current account dynamics is examined for a small open economy which is subject to exogenous changes in its static terms of trade and in world interest rates. The model used is one with overlapping finite-lived generations, which we argue gives rise to a more reasonable saving behaviour than previously used models with infinite lived consumers.In particular no restrictions on the rate of time preference is required.Anticipated and unanticipated, as well as temporary and permanent,terms of trade changes have very different effects. There is, however,a general tendency towards cycles in both savings and investment,which gives rise to cycles in the current account.The classic Harberger-Laursen-Metzler effect on saving of a terms of trade deterioration can have any sign for plausible parameter values,both for temporary and permanent disturbances.
ER  -