Net Foreign Asset Position and Consumption Dynamics in the International Economy

34 Pages Posted: 3 Mar 2006

See all articles by Fabio Pietro Ghironi

Fabio Pietro Ghironi

University of Washington

Talan Iscan

Dalhousie University - Department of Economics

Alessandro Rebucci

Johns Hopkins University - Carey Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

We examine the effect of non-zero, long-run foreign asset positions on consumption dynamics in response to productivity shocks in a two-country, dynamic, general equilibrium model, with different discount factors across countries populated by overlapping generations of households. We then compare the model results to those of a VAR for the United States versus the rest of the G-7. In the data, we find that permanent worldwide productivity shocks lead to net foreign asset and consumption dynamics that are consistent with interpreting the United States as the impatient economy in our model and are not consistent with symmetric models with equal discount factors.

Keywords: Net foreign assets, consumption, consumption tilting, productivity

JEL Classification: F41, C33

Suggested Citation

Ghironi, Fabio Pietro and Iscan, Talan and Rebucci, Alessandro, Net Foreign Asset Position and Consumption Dynamics in the International Economy (April 2005). IMF Working Paper No. 05/82, Available at SSRN: https://ssrn.com/abstract=888128

Fabio Pietro Ghironi (Contact Author)

University of Washington ( email )

Department of Economics
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HOME PAGE: http://faculty.washington.edu/ghiro

Talan Iscan

Dalhousie University - Department of Economics ( email )

Halifax, Nova Scotia B3H 3J5
Canada
902-494-6994 (Phone)
902-494-6917 (Fax)

Alessandro Rebucci

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu/faculty-research/faculty-directory/alessandro-rebucci-phd

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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