TradeLecture18

TradeLecture18 - International Borrowing and Lending...

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International Borrowing and Lending International movements of capital Think of borrowing and lending between countries Example : A U.S. bank lends to a Mexican firm. This can be interpreted as intertemporal trade . This refers to trade between the present and the future. Lending is like exporting current consumption and importing future consumption. Borrowing is like importing current consumption and exporting future nsumption consumption. © Ben Zissimos, Vanderbilt University
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Intertemporal Production Possibilities and Trade Imagine an economy that consumes only one good and will exist for only two periods, which we will call ‘present’ and ‘future’. The intertemporal production possibility frontier represents a trade-off between present and future production of the consumption good. Its shape will differ among countries: ome countries will be biased toward present output. Some countries will be biased toward present output. • Some countries will be biased toward future output.
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TradeLecture18 - International Borrowing and Lending...

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