Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/72269 
Year of Publication: 
2004
Series/Report no.: 
Reihe Ökonomie / Economics Series No. 161
Publisher: 
Institute for Advanced Studies (IHS), Vienna
Abstract: 
This paper considers the implications of consumption and borrowing externalities in a small open economy framework. The former reflect the assumption that status conscious agents care about the relative consumption of imported goods, while the latter arise because agents do not take into account the effects of their borrowing decisions on the interest rate on debt. We analyze in the paper the impact of an increase in the degree of status preference on the saddlepath adjustment of the decentralized economy. In addition, the contrasting steadystate and dynamic properties of the social planner's economy are derived, along with the corresponding optimal tax and subsidy policies.
Subjects: 
imports
status-preference
current account dynamics
JEL: 
E21
F41
Document Type: 
Working Paper

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