Publication: The Current Account as A Dynamic Portfolio Choice Problem
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Date
2009-03-01
ISSN
Published
2009-03-01
Author(s)
Lowenkron, Alexandre
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Abstract
The current account can be understood as the outcome of investment decisions made by domestic and foreign investors. These decisions can be decomposed into a portfolio rebalancing and a portfolio growth component. This paper provides empirical evidence of the importance of portfolio rebalancing for the dynamics of the current account. The authors evaluate the predictions of a partial-equilibrium model of the current account with dynamic portfolio choices, in which portfolio rebalancing is driven by changes in investment opportunities. Using data for the United States and Japan, the authors find evidence supporting innovations in investment opportunities as an important mechanism to explain international capital flows.
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“Lowenkron, Alexandre; Didier, Tatiana. 2009. The Current Account as A Dynamic Portfolio Choice Problem. Policy Research working paper ; no. WPS 4861. © World Bank. http://hdl.handle.net/10986/4057 License: CC BY 3.0 IGO.”
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