Abstract
This paper develops a simple model to study the impact of stock markets on the current account. A closed-form solution for the current is derived from the optimal portfolio and consumption/saving choices of a representative agent. Formally, the model can be seen as a stock market-augmented version of the fundamental equation of the current account popularized by Jeffrey Sachs. It appears to shed light on recent developments in the U.S. current deficit. The model also shows how the current may help predict future stock market performance and/or endowment streams.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.