Genre: Information/Explanation

Working papers from the Economics Department of the OECD that cover the full range of the Department's work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues. A Simple Model of the Relationship Between Productivity, Saving and the Current Account This paper uses a simple dynamic stochastic general equilibrium model to explore the qualitative impact of productivity shocks on current account positions via their impact on the saving behaviour of households. The analysis shows that the direction of the impact is ambiguous from a theoretical point of view. This impact depends in particular on consumer's willingness to shift consumption over time relative to their willingness to shift consumption between different types of goods, on whether they believe the shock to be temporary or permanent, and on the sector in which the shock occurs.