Technology capital and the U.S. current account
By: Ellen R. McGrattan and Edward C. Prescott
Contributors: Prescott, Edward C.; Federal Reserve Bank of Minneapolis. Research Department
Series: Working paper / Federal Reserve Bank of Minneapolis, Research Dept -- 646
Publisher: Federal Reserve Bank of Minneapolis, Research Dept.
Published: 2006
Place of publication: Minneapolis, MN]
Language: eng
Format: [electronic resource] /
Description: We develop a general equilibrium multicountry model and use it to evaluate concerns of high U.S. current account deficits and a declining net U.S. investment position. We introduce technology capital which can be used by multinationals in some or all of their domestic and foreign operations. Prime examples are brand equity and patents. This capital is intangible and is therefore expensed rather than capitalized. The expensing of the investment implies that there are differences in reported and actual balance of payments  and net asset positions. Although our model economy has efficient domestic and international capital markets, the predicted equilibrium paths for the reported series exhibit similar behavior to the observed U.S. time series. Thus, on the basis of our model's quantitative predictions, we conclude that there is no prima facie evidence that the large current account deficits are a harbinger of a future crisis.
Notes: Title from PDF file (viewed on Jan. 4, 2007).

"November 2006."

Includes bibliographical references.

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