The Role of Stock Markets in Current Account Dynamics A Time Series Approach |
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| Author:
| Mercereau, Benot |
| Series title: | IMF Working Papers |
| ISBN: | 978-1-4518-9408-0 |
| Publication Date: | Mar 2004 |
| Publisher: | International Monetary Fund
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| Book Format: | Ebook |
| List Price: | Contact Supplier contact
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Book Description:
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This paper develops a simple model to study the impact of stock markets on the current account. A closed-form solution for the current account is derived from the optimal portfolio and consumption/saving choices of a representative agent. Formally, the model can be seen as a stock market-augmented version of the "fundamental equation of the current account" popularized by Jeffrey Sachs. It appears to shed light on recent developments in the U.S. current account deficit. The model also...
More DescriptionThis paper develops a simple model to study the impact of stock markets on the current account. A closed-form solution for the current account is derived from the optimal portfolio and consumption/saving choices of a representative agent. Formally, the model can be seen as a stock market-augmented version of the "fundamental equation of the current account" popularized by Jeffrey Sachs. It appears to shed light on recent developments in the U.S. current account deficit. The model also shows how the current account may help predict future stock market performance and/or endowment streams.