All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC

Arman Mansoorian and Constantine Angyridis
''The Harberger-Laursen-Metzler effect with with Marshallian preferences''
( 2008, Vol. 6 No.11 )
The effects of a terms of trade deterioration on the current account are studied when the representative agent has Marshallian preferences, with which the rate of time preference is a decreasing function of savings. A terms of trade deterioration reduces the permanent income of the representative agent. With Marshallian preferences, savings fall and the country runs a current account deficit. The numerical evaluations of the model suggest that with standard functional forms and reasonable parameter values the Harberger-Laursen-Metzler effect is recovered in an infinite horizon model with an endogenous rate of time preference.
JEL: F4 - Macroeconomic Aspects of International Trade and Finance: General
Manuscript Received : Aug 22 2007 Manuscript Accepted : Mar 06 2008

  This abstract has been downloaded 1947 times                The Full PDF of this paper has been downloaded 156037 times