Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71244
Authors: 
Fisher, Walter H.
Year of Publication: 
2002
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 110
Abstract: 
In this paper we analyze the implications of status-preference, modeled as relative wealth, for the current account in a small open economy framework with capital stock dynamics. We demonstrate that the transitional dynamics of the economy is characterized by two distinct speeds of adjustment: a speed of adjustment arising from status-preference and a speed of adjustment arising from installation costs of investment. This structure implies that the current account balance depends on both speeds of adjustment as well as on the long-run equilibrium, which is a function of the degree of status-consciousness. As a consequence, the current account can exhibit non-monotonic behavior in transition to the steady-state equilibrium.
Subjects: 
current account
status seeking
relative wealth
open economy dynamics
JEL: 
E21
F41
Document Type: 
Working Paper

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