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Article: Robustness, information-processing constraints, and the current account in small open economies

TitleRobustness, information-processing constraints, and the current account in small open economies
Authors
KeywordsConsumption smoothing
Current account
Detection error probabilities
Rational inattention
Robustness
Issue Date2012
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jie
Citation
Journal Of International Economics, 2012, v. 88 n. 1, p. 104-120 How to Cite?
AbstractIn this paper we examine the effects of two types of "induced uncertainty", model uncertainty due to robustness (RB) and state uncertainty due to finite information-processing capacity (called rational inattention or RI), on consumption and the current account. We show that the combination of RB and RI improves the model's predictions for (i) the contemporaneous correlation between the current account and income and (ii) the volatility and persistence of the current account in small open emerging and developed economies. In addition, we show that the two informational frictions improve the model's ability to match the impulse response of consumption to income and the relative volatility of consumption to income growth. © 2012 Elsevier B.V.
Persistent Identifierhttp://hdl.handle.net/10722/145960
ISSN
2015 Impact Factor: 2.017
2015 SCImago Journal Rankings: 3.723
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLuo, Yen_HK
dc.contributor.authorNie, Jen_HK
dc.contributor.authorYoung, ERen_HK
dc.date.accessioned2012-03-27T09:04:07Z-
dc.date.available2012-03-27T09:04:07Z-
dc.date.issued2012en_HK
dc.identifier.citationJournal Of International Economics, 2012, v. 88 n. 1, p. 104-120en_HK
dc.identifier.issn0022-1996en_HK
dc.identifier.urihttp://hdl.handle.net/10722/145960-
dc.description.abstractIn this paper we examine the effects of two types of "induced uncertainty", model uncertainty due to robustness (RB) and state uncertainty due to finite information-processing capacity (called rational inattention or RI), on consumption and the current account. We show that the combination of RB and RI improves the model's predictions for (i) the contemporaneous correlation between the current account and income and (ii) the volatility and persistence of the current account in small open emerging and developed economies. In addition, we show that the two informational frictions improve the model's ability to match the impulse response of consumption to income and the relative volatility of consumption to income growth. © 2012 Elsevier B.V.en_HK
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jieen_HK
dc.relation.ispartofJournal of International Economicsen_HK
dc.subjectConsumption smoothingen_HK
dc.subjectCurrent accounten_HK
dc.subjectDetection error probabilitiesen_HK
dc.subjectRational inattentionen_HK
dc.subjectRobustnessen_HK
dc.titleRobustness, information-processing constraints, and the current account in small open economiesen_HK
dc.typeArticleen_HK
dc.identifier.emailLuo, Y: yluo@econ.hku.hken_HK
dc.identifier.authorityLuo, Y=rp01083en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jinteco.2012.02.004en_HK
dc.identifier.scopuseid_2-s2.0-84865714350en_HK
dc.identifier.hkuros198932en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-84865714350&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume88en_HK
dc.identifier.issue1en_HK
dc.identifier.spage104en_HK
dc.identifier.epage120en_HK
dc.identifier.eissn1873-0353-
dc.identifier.isiWOS:000309944600008-
dc.publisher.placeNetherlandsen_HK
dc.identifier.scopusauthoridLuo, Y=23767888300en_HK
dc.identifier.scopusauthoridNie, J=55064184600en_HK
dc.identifier.scopusauthoridYoung, ER=16744833200en_HK
dc.identifier.citeulike10445385-

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