Macroeconomic adjustments to changes in the economic environment are to a large extent conditioned by the intertemporal choices of economic agents. When agents face an intertemporal budget constraint, a decision to alter current indebtedness implies changes in future consumption possibilities and will be based on expectations of the entire future path of key variables and not only current variables. A formal model to show how today’s current account is a function of both current and future economic variables is presented. The determination of the current account under classical assumptions of market clearing and continuous full employment is emphasized. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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