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Arman Mansoorian and Constantine Angyridis |
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''The Harberger-Laursen-Metzler effect with with Marshallian preferences'' |
( 2008, Vol. 6 No.11 ) |
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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. |
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Keywords: |
JEL: F4 - Macroeconomic Aspects of International Trade and Finance: General
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Manuscript Received : Aug 22 2007 | | Manuscript Accepted : Mar 06 2008 |
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