Extrapolative expectations and capital flows during convergence

• 成果类型: Article
• 署名作者: Cozzi, Guido; Davenport, Margaret
• 署名单位: University of St Gallen; University of St Gallen
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2017.06.005
• 发表日期: 2017
• 页码: 169-190
• 关键词: capital flows; Extrapolative expectations; Global imbalances; Technological convergence

摘要

How long shall a country take to learn the world technological frontier? What would happen if that country found the same difficulties in learning the true model of its economy? After all, countries catching up often experience life-changing transformations during the catch-up to a balanced growth path. We show that an open economy, learning rational expectations alongside foreign technology, may be characterized by excessive saving and current account surpluses, as often observed in the data and at odds with the standard open economy theoretical predictions, and not fully explained by standard adaptations such as habit formation. Moreover, such a learning process in a large developing country can upset the savings behavior of a fully rational expectations advanced country. In a US-China calibration, we show that this effect can be so strong as to explain important current account imbalances, the savings glut hypothesis, as well as the distribution of factor income. (C) 2017 Elsevier B.V. All rights reserved.