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dc.contributor.authorDavies, Ronald B.
dc.contributor.authorShea, Paul, 1977-
dc.date.accessioned2007-02-21
dc.date.available2007-02-21
dc.date.issued2006-07-31
dc.identifier.urihttp://hdl.handle.net/1794/3882
dc.description39 p.en
dc.description.abstractThis 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.extent255087 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_USen
dc.publisherUniversity of Oregon, Dept of Economicsen
dc.relation.ispartofseriesUniversity of Oregon Economics Department Working Papers ; 2006-15en
dc.subjectCurrent accounten
dc.subjectInternational debt movementsen
dc.subjectExpectationsen
dc.subjectAdaptive learningen
dc.titleAdaptive Learning with a Unit Root: An Application to the Current Accounten
dc.typeWorking Paperen


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