Futures Markets, Oil Prices and the Intertemporal Approach to the Current Account

Elif Arbatli
The intertemporal approach to the current account suggests modeling movements in the current account in a forward-looking, dynamic framework. In this framework, the current account reflects consumption smoothing of agents that lend and borrow from the rest of the world in the face of transitory shocks to income. As in permanent income models of consumption, the marginal propensity to consume out of transitory shocks is predicted to be significantly smaller which implies that a permanent...
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