This paper lirst demonstrates that in a simple intertemporal open economy model, the current account is equal to the expected decline of the present discounted value of net output of a country.Net output is delined as gross domestic product less the sum of investment plus government spending. It then uses econometric methods for present value models to analyze the current account for four countries. In two of these countries, the model does a satisfactory job of explaining the current account.

No abstract

This paper develops a testable intertemporal model of the current account that allows for variable interest rates and exchange rates. These additional variables are channels through which external shocks may in¯uence the domestic current account. The restrictions from the theoretical model are subjected to present value tests using quarterly data from three small open economies. The paper ®nds that including the interest rate and exchange rate improves the ®t of the intertemporal model over what was found in previous studies. The model predictions better replicate the volatility of current account data and better explain historical episodes of current account imbalance.

Can a simplified United States tax system act as an effective deterrent to individual income tax evasion? Deterrence is usually sought through alternative methods that create fear, for example, increasing the probability of an audit. In contrast, this paper analyzes whether a simple tax system creates comfort and encourages compliance. Using data from the 1990 Taxpayer Opinion Survey, our approach is to estimate an empirical model that explores the connections between (i) taxpayer perceptions of the complexity of the tax system, (ii) taxpayer perceptions of the unfairness of the tax system, and (iii) taxpayer noncompliance. The results suggest that simplifying the tax system may not be an effective deterrent to tax evasion because taxpayers do not necessarily consider a complex tax system to be unfair.

No abstract