Adaptive Learning with a Unit Root: An Application to the Current Account
| 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.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 | |
| dc.format.mimetype | application/pdf | |
| dc.identifier.uri | https://hdl.handle.net/1794/3882 | |
| 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 |