The Current Account in the Eacroeconomic Adjustment Process

23 Pages Posted: 6 Jul 2004 Last revised: 6 Sep 2010

See all articles by Jeffrey D. Sachs

Jeffrey D. Sachs

Columbia University - Columbia Earth Institute; National Bureau of Economic Research (NBER)

Date Written: November 1981

Abstract

This paper provides a formal analysis of the current account balance in a dynamic model with optimizing agents. Two analytical ideas are stressed. First, an economy's current account balance depends as much on fixture economic trends as on the current economic environment. A shift in fiscal policy, for example, will have one effect on the current account if it is perceived to be temporary and another if it is seen to be permanent. Second, temporary disturbances in the economy have permanent effects, by altering the entire future path of the economy's international indebtedness.

Suggested Citation

Sachs, Jeffrey D., The Current Account in the Eacroeconomic Adjustment Process (November 1981). NBER Working Paper No. w0796. Available at SSRN: https://ssrn.com/abstract=227536

Jeffrey D. Sachs (Contact Author)

Columbia University - Columbia Earth Institute ( email )

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