A Quantitative Examination of Current Account Dynamics in Equilibrium Models of Barter Economies

38 Pages Posted: 15 Feb 2006

See all articles by Enrique G. Mendoza

Enrique G. Mendoza

National Bureau of Economic Research (NBER); University of Pennsylvania

Date Written: February 1992

Abstract

This paper provides a numerical analysis of an intertemporal equilibrium model of a small open, barter economy that is subject to random shocks affecting endowments, the terms of trade, and the real interest rate. Equilibrium stochastic processes for macroeconomic aggregates are computed and their properties are compared with observed stylized facts. The model mimics the Harberger-Laursen-Metzler effect, but cannot account for a countercyclical trade balance, the variability of the real exchange rate, and the income elasticity of imports. The results also show that the correlation between the trade balance and the terms of trade, given incomplete insurance markets, is sensitive to changes in preference parameters and in the persistence of exogenous shocks.

JEL Classification: E32, N12

Suggested Citation

Mendoza, Enrique G., A Quantitative Examination of Current Account Dynamics in Equilibrium Models of Barter Economies (February 1992). IMF Working Paper No. 92/14, Available at SSRN: https://ssrn.com/abstract=884602

Enrique G. Mendoza (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://www.sas.upenn.edu/~egme/index.html

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