Determinants of External Imbalances: The Role Taxes, Government Spending and Productivity

45 Pages Posted: 14 Aug 2007 Last revised: 20 Sep 2010

See all articles by Leonardo Leiderman

Leonardo Leiderman

Tel Aviv University - Eitan Berglas School of Economics; Bank of Israel

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: June 1991

Abstract

This paper develops and estimates a dynamic optimizing model of the current account. The model focuses, on real factors that determine the evolution of saving and investment, and hence the external balance. Three types of shocks are at the center of the analysis: productivity shocks, shocks to labor input, and tax policy shocks. While our approach is in line with the real business cycle models of the current account, the distinguishing feature of the work is the application of econometric methods to time series data for a small open economy so as to directly estimate the parameters governing saving and investment under rational expectations restrictions.

Suggested Citation

Leiderman, Leonardo and Razin, Assaf, Determinants of External Imbalances: The Role Taxes, Government Spending and Productivity (June 1991). NBER Working Paper No. w3738. Available at SSRN: https://ssrn.com/abstract=473921

Leonardo Leiderman (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

Bank of Israel

P.O. Box 780
Jerusalem, 91907
Israel

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 7303 (Phone)
+972 3 640 9908 (Fax)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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