Current Project Dynamic Analysis Based On Consumer Durables

Since the 21 century, the global economic imbalance has been paid more and more attention on by economists, which can mainly explained as the deficit in United States and surplus in Asian countries of current account. In 2007, the surplus of Chinese current account has reached 11.9% of its GDP, and the deficit of American current account has reached 7% of its GDP. Research on the changing of current account in different countries has become one of the most important issues in world's economy.Determinant theories of current account include the following: the academic points of price-specie automatic adjustment mechanism, elasticity of exchange rate, multiplier approach, absorption approach, structural approach, current account Intertemporal Approach etc.. Compared with other theories, the current account Intertemporal Approach gives an microeconomic base in its explanation. This approach emphasis on the dynamic adjustment of current account, and it also analyze from the angel of civil demand other than supply, which makes this theory sounds more reasonable. However, in using this approach, most economists deem the consumer goods totally as non-durable goods, which is different with the facts. In real worlds, durable goods is a great component in consumer goods, especially in developed countries. People there spend a great part of their earnings. on the consumption of durable goods. And we all know that durable goods have much differences with non-durable goods. The former must be bought once but can work for a long time. It takes durable goods a long time to provide its service to customers, and the utility is decided by the total durable goods you have other than the growth of new spending. This is totally different with non-durables goods. So, it's very important to consider the effects of durable goods in using the current account Intertemporal Approach.This paper therefore, considers the effects of durable goods when analyzing the customer's consumer choice, which make the intertemporal approach more reasonable. The main contents in this paper including the following:(1) A new model is established in analyzing the current account, which give the durable goods into consideration. The new model finds negative relationship between the consumption of durable goods and the changing of current account. The more durable goods consumed by the person, the more of its negative effect on current account.(2) In the new model including durable goods, the effects of products, investment and government expenditure on current account have not changed compared with the model without durable goods. However, interests and consumption customs may effects the current account differently by effects the expenditure on durable goods.(3) Basing on the new model above, this paper established a stochastic model by giving probability into consideration. The stochastic impact of products, productivity and government expenditure may well effect the current account, but the effect also depends on its time and strength.(4) Basing on the models above, this paper empirically studies the fluctuation of current account in United States, Korea and China. Results show that the higher the percent of durable goods expenditure, the greater effect on current account by durable goods. Because U.S. is the most developed country and the percent of durable goods consumption here is higher than the other two countries, so the durable goods consumption gives greater effect on its current account than the other two countries.(5) In both Korea and China, governments play great role in the economy and they both choose the development way of exports. In this circumstances, the effect of government's policies on the changing of current account is greater than economic factors, which makes the empirical result in these two countries is not good enough. But if we only pay attention to the changing trends got in these two countries, we still can find that the intertemporal approach can explain the decision of current account as expected.(6) Compared with developed countries and even with developing countries, expenditure of durable goods in China is far more less than other countries. Thus, during the process of stimulating domestic demand, it's also necessary for China to get consumption structure upgraded and durable goods consumption higher, which may has a negative effect on the surplus of Chinese current account.To illustrate all these questions, this paper is divided into seven chapters. Chapter one is introduction, chapter two is summary and evaluation of literatures, chapter three is intertemporal approach of current account in consideration of durable goods: determinant model, chapter four is intertemporal approach of current account in consideration of durable goods: stochastic model, chapter five is intertemporal approach of current account in consideration of durable goods: empirically study, the chapter six is analyze on the Chinese current account, and chapter seven is conclusion of this paper, its limitation and the expectation of future research.