In a recent paper, Gruber (Gruber, J.W., 2004, A Present Value Test of Habits and the Current Account, Journal of Monetary Economics 51, 1495-1507) claims that habit formation in consumption plays an important role in current account fluctuations in selected developed countries, extending the...

This paper investigates whether extending the intertemporal model of the current account to allow for variations in the terms of trade improves its ability to fit the data. It derives a testable present-value representation of the current account that encompasses the Harberger-Laursen-Metzler...

A recent paper claims that habit formation in consumption plays an important role in current account fluctuations in selected developed countries, extending the present-value model of the current account (PVM) with consumption habits. In this paper, however, I show that the habit-forming PVM is...