The paper sets out an overlapping generations model in an open economy context. In the absence of productive capital a real consol is the vehicle for intertemporal consumption smoothing. The presence of a long term asset implies that the anticipated future path of the economy, through the term...

This paper investigates the spending and current-account effects of permanent terms-of-trade shifts in a model where households maximize utility over an infinite planning period. In the framework we adopt, an economy specialized in production must experience a fall in aggregate spending and a...