Endogenous Discounting, the World Saving Glut and the U.S. Current Account / Horag Choi, Nelson C. Mark, Donggyu Sul.

Format:

Book

Author/Creator:

Choi, Horag.

Contributor:

National Bureau of Economic Research.

Mark, Nelson C.

Sul, Donggyu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13571.

NBER working paper series no. w13571

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

We study the evolution of the U.S. current account in a two-country dynamic stochastic endowment model in which a single non-state contingent bond is the only internationally traded asset. The paper focuses on the world `saving glut' as the primary cause of continual deterioration in the current account and departs from the standard framework by introducing a three-parameter model of the subjective discount factor that depends on societal (per capita) variables that are external to household choices. When agents in the model are presented with U.S. and rest-of-world endowment data as the realization of the exogenous state vector, endogenously driven short-run international differences in subjective discounting that display increasing relative U.S. impatience create saving and current account imbalances that matches patterns observed in the data.

Notes:

Print version record

November 2007.