dc.contributor.author |
Davies, Ronald B. |
|
dc.contributor.author |
Shea, Paul, 1977- |
|
dc.date.accessioned |
2007-02-21 |
|
dc.date.available |
2007-02-21 |
|
dc.date.issued |
2006-07-31 |
|
dc.identifier.uri |
http://hdl.handle.net/1794/3882 |
|
dc.description |
39 p. |
en |
dc.description.abstract |
This paper develops a simple two-country, two-good model of international trade
and borrowing that suppresses all previous sources of current account dynamics. Under
rational expectations, international debt follows a random walk. Under adaptive learning
however, international debt behaves like either a stationary or an explosive process.
Whether debt converges or diverges depends on the model’s exact specification and the
specific learning algorithm that agents employ. When debt diverges, a financial crisis
eventually occurs to ensure that the model’s transversality condition holds. Such a
financial crisis causes an abrupt decrease in the debtor country’s consumption and utility. |
en |
dc.format.extent |
255087 bytes |
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dc.format.mimetype |
application/pdf |
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dc.language.iso |
en_US |
en |
dc.publisher |
University of Oregon, Dept of Economics |
en |
dc.relation.ispartofseries |
University of Oregon Economics Department Working Papers ; 2006-15 |
en |
dc.subject |
Current account |
en |
dc.subject |
International debt movements |
en |
dc.subject |
Expectations |
en |
dc.subject |
Adaptive learning |
en |
dc.title |
Adaptive Learning with a Unit Root: An Application to the Current Account |
en |
dc.type |
Working Paper |
en |