In an influential series of contributions, Kraay and Ventura (2000, 2003) offer a "new rule" for the current account: in response to a temporary income shock, the change in the current account is equal to the change in saving times the ratio of net foreign assets to wealth. We analyze the impact...

It is well established that private information is critical to our understanding of asset prices. In this paper we argue that it also affects international capital flows and use a simple two-country DSGE model to illustrate its impact. We show that private information (i) increases the...