TY  - JOUR
AU  - Clarida,Richard H.
TI  - International Lending and Borrowing in a Stochastic Sequence Equilibrium
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1944
PY  - 1986
Y2  - June 1986
UR  - http://www.nber.org/papers/w1944
L1  - http://www.nber.org/papers/w1944.pdf
N1  - Author contact info:
Richard H. Clarida
Columbia University
420 West 118th Street
Room 1111, IAB
New York, NY  10027
Tel: 212/854-3676
Fax: 212/854-8059
E-Mail: rhc2@columbia.edu
AB  - This paper is a theoretical investigation of international lending and
borrowing in the context of a general equilibrium model in which national
productivities are subject to random fluctuations and rates of time
preference differ among countries. International capital flows arise from
the efforts of risk-averse households situated in different countries to
self-insure against random productivity fluctuations. We establish the
existence of a rational expectations equilibrium in which the world
interest rate is constant and strictly less than the rate of time
preference of the least impatient countries. The rate of time preference,
solvency restrictions on borrowing, and balanced-budget fiscal policies are
rigorously analyzed.
ER  -