TY  - JOUR
AU  - Ventura,Jaume
TI  - Towards a Theory of  Current Accounts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9163
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9163
L1  - http://www.nber.org/papers/w9163.pdf
N1  - Author contact info:
Jaume Ventura
CREI
Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005-Barcelona
SPAIN
Tel: +34 93 542 1765
Fax: +34 93 542 1860
E-Mail: jventura@crei.cat
AB  - The current accounts data of industrial countries exhibits some strong patterns that are inconsistent with the intertemporal approach to the current account.  This is the basic model that international economists have been using for more than two decades to think about current account issues. This paper shows that it is possible to go a long way towards reconciling the theory and the data by introducing two additional features to the basic model:  investment risk and adjustment costs to investment. Moreover, these extensions generate new and unexpected theoretical predictions that receive substantial support in the data. The overall message is therefore positive: with a couple of reasonable modifications, the intertemporal approach to the current account provides a fairly good description of the industrial country data.
ER  -