We use a two-good dynamic optimizing small open economy model to provide a new explanation of the J-Curve phenomenon in terms of habit persistence in consumption and sluggishness in capital adjustment. The results differ markedly depending on the permanence or temporary nature of the relative...

We use a two-good dynamic intertemporal general equilibrium model to formalize the economic intuition of Krugman about the explanation of the J-curve phenomenon in terms of habit persistence in consumption and sluggishness in capital adjustment. The results differ markedly according to the...

Most of empirical studies find evidence of the J-Curve, but recent results cast doubt over its standard explanation. By addressing the countercyclicality of the current account and its dynamic link with the terms of trade, this paper revisits the J-Curve phenomenon using a two-good dynamic...

Although monetary union created the conditions for improving economic and financial integration in the euro area, in the context of the financial and sovereign crises, it has also been accompanied by the emergence of severe imbalances in savings and investment, credit and housing booms in some...

In recent years China has experienced two forms of extreme macroeconomic imbalance: an expenditure imbalance in the sense of very high investment and very low consumption, giving rise to rapid capital accumulation; and an imbalance between expenditure and pro-duction, producing external...

This note discusses two complex issues. First, why might a country want to reduce its current account deficit or surplus? And second, why might the international community ask for more? In general, there are both domestic and multilateral reasons for countries to reduce current account deficits...

In recent years China has experienced two forms of extreme macroeconomic imbalance: an expenditure imbalance in the sense of very high investment and very low consumption, giving rise to rapid capital accumulation; and an imbalance between expenditure and production, producing external...

Using empirical evidence from panel analysis of current account dynamics and of bilateral trade balances, the paper argues that the large German current account surplus during the 2000s can be explained by an increasing gap between productivity growth in manufacturing vis-à-vis services. Such a...

Before the crisis, there were strong arguments for reducing global imbalances. As a result of the crisis, there have been significant changes in saving and investment patterns across the world and imbalances have narrowed considerably. Does this mean that imbalances are a problem of the past?...

In recent years China has experienced two forms of extreme macroeconomic imbalance: an expenditure imbalance in the sense of very high investment and very low consumption, giving rise to rapid capital accumulation; and an imbalance between expenditure and production, producing external...