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Current Accounts in the Long and the Short Run
2002
NBER macroeconomics annual
Faced with income fluctuations, countries smooth their consumption by raising savings when income is high, and vice versa. How much of these savings do countries invest at home and abroad? In other words, what are the effects of fluctuations in savings on domestic investment and the current account? In the long run, we find that countries invest the marginal unit of savings in domestic and foreign assets in the same proportions as in their initial portfolio, so that the latter is remarkably
doi:10.1086/ma.17.3585276
fatcat:ykop7tz5bbakxcq27pxvurag4i