Question: Gains from Financial Globalization, Consider the Inter-temporal Model with two time periods, t=0 and t=1. Home is a small open economy that can borrow and

Gains from Financial Globalization,

Consider the Inter-temporal Model with two time periods, t=0 and t=1.

Home is a small open economy that can borrow and lend in the first period at the world real interest rate of 5%.

In the first period, output is Yo= 100 and in the second period Y1= 90. The country wants to smooth consumption as much as possible.

The country ended period t=-1 with positive external assets,W-1= 10.

What is the value of the current account in t=1?

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