NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Saving and Investment in an Open Economy with Non-Traded Goods

Charles Engel, Kenneth Kletzer

NBER Working Paper No. 2141
Issued in 1987
NBER Program(s):   ITI   IFM

We examine a model of a small open economy in which there is free international mobility of financial capital, investment in capital goods and a non-traded good. Such an environment is rich enough to explain several phenomena that are inexplicable in more barren models. We suggest an explanation of why saving and investment may be correlated even with no restrictions on trade in assets. We explain why a high saving country may nonetheless borrow from abroad to finance investment. We also provide an optimizing model of stages in the balance of payments.

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Document Object Identifier (DOI): 10.3386/w2141

Published: International Economic Review, Volume 30, November 1989, pp. 735-752 citation courtesy of

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