1. 1 Chapter 13 International Trade in Assets

2. 2 Current account analysis Small open economy Two period model with investment Current account Effect on current account

3. 3 Revisit Current Account National saving is GNP minus consumption minus gov’t spending S = Sp+ Sg= Y + NFP – C – G Using Y = C + I + G + NX, we have ‘ S = I + NX + NFP Defining the current account surplus: S = I + CA

4. 4 Figure 13.10 Deviations from Trend in the Current Account Surplus and GDP

5. 5 Figure 13.12 The Twin Deficits

6. 6 Figure 13.11 Government Spending and Taxes

7. 7 Small open economy Combine the closed economy with world interest rate Interest rate in SOE is world interest rate Yd=C+I+G+NX

8. 8 Figure 13.13 A Small Open- Economy Model with Production and Investment

9. 9 Figure 13.14 An Increase in the World Real Interest Rate

10. 10 An Increase in the World Real Interest Rate CA increase Y increase I decrease C ?

11. 11 Figure 13.15 A Temporary Increase in Government Spending

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13. 13 Figure 13.17 An Increase in Current Total Factor Productivity

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15. 15 Figure 13.18 An Increase in Future Total Factor Productivity

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17. 17 Figure 13.19 Investment as a Percentage of GDP