International Lending and Borrowing in a Stochastic Sequence Equilibrium / Richard H. Clarida.

Format:

Book

Author/Creator:

Clarida, Richard H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1944.

NBER working paper series no. w1944

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Summary:

This paper is a theoretical investigation of international lending and

borrowing in the context of a general equilibrium model in which national

productivities are subject to random fluctuations and rates of time

preference differ among countries. International capital flows arise from

the efforts of risk-averse households situated in different countries to

self-insure against random productivity fluctuations. We establish the

existence of a rational expectations equilibrium in which the world

interest rate is constant and strictly less than the rate of time

preference of the least impatient countries. The rate of time preference,

solvency restrictions on borrowing, and balanced-budget fiscal policies are

rigorously analyzed.

Notes:

Print version record

June 1986.