Current Account Dynamics under Information Rigidity and Imperfect Capital Mobility

Shibata, Akihisa; Shintani, Mototsugu; Tsuruga, Takayuki

Institute of Social and Economic Research Discussion Papers, 2018, 1036, 1-43

Number of Access:688（2025-11-05 18:09 Counts）

Identifier to cite or link to this item: https://hdl.handle.net/11094/70078

Item Information

Output File Export EndNote Basic Export Mendeley

Title
Current Account Dynamics under Information Rigidity and Imperfect Capital Mobility
Creator
NRID
1000000216003 1000000216003
CreatorName
Shibata, Akihisa
NRID
1000000252718 1000000252718
CreatorName
Shintani, Mototsugu
NRID
1000040511720 1000040511720
ORCID
0000-0002-8177-2330 0000-0002-8177-2330
researchmap permalink
7000008934 7000008934
Scopus Author ID
16424964300 16424964300
CreatorName
Tsuruga, Takayuki
Subject
Capital mobility
Imperfect information
Inattentiveness
Permanent income hypothesis
Abstract
The current account in developed countries is highly persistent and volatile in comparison to output growth. The standard intertemporal current account model with rational expectations (RE) fails to account for the observed current account dynamics together with persistent changes in consumption. The RE model extended with imperfect capital mobility by Shibata and Shintani (1998) can account for persistent changes in consumption, but only at the cost of the explanatory power for the volatility of the current account. This paper replaces RE in the intertemporal current account model with sticky information (SI) in which consumers are inattentive to shocks to their income and infrequently adjust their consumption. The SI model can better explain a persistent and volatile current account than the RE model but it overpredicts the persistence of changes in consumption. The SI model extended with imperfect capital mobility almost fully explains current account dynamics and the persistence of changes in consumption, if high degrees of information rigidity and imperfect capital mobility are taken into account.
Publisher
The Institute of Social and Economic Research, Osaka University
Source Title
Institute of Social and Economic Research Discussion Papers
Volume (Issue)
1036
Page
1-43
Date of Issued
2018-07
Language
English
Handle URL
https://hdl.handle.net/11094/70078
Relation.references
URI
https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2018/DP1036.pdf
Access Rights
metadata only access
Category
ディスカッション／ワーキング・ペーパー DP/WP
Institute of Social and Economic Research Discussion Papers