Comment

Abstract

In a commonly mentioned incident (although, as it turns out, an apocryphal one), F. Scott Fitzgerald opined, “The rich are different from you and me,” to which Ernest Hemingway replied “Yes, they have more money.” “External Performance in Low‐IncomeCountries,” by LoneChristiansen, Alessandro Prati, Luca Antonio Ricci, and Thierry Tressel, revisits the Fitzgerald‐Hemingway controversy. Do the rich (countries) differ from others, at least in terms of the determinants of the current account, the real exchange rate, and net foreign asset holdings? This is an interesting issue since it gets at the question of whether “development macroeconomics” is a distinct branch of macroeconomics. It is also an important issue because of its relevance for policy prescriptions: can policy for low‐income countries be based on analysis drawn from empirical results for high‐income countries? One can think of two empirically relevant sets of differences in the determination of macroeconomic variables such as the current account, the real exchange rate, and net foreign asset holdings between rich and poor countries. First, there may be variables that are important in poor countries but either are not present or are of very minor importance in rich countries. For example, concessional loans may be an important source of (or response to) fluctuations in macroeconomic variables in poor countries, but not in rich countries. Second, differences in structure between low‐income and high‐income countries may lead to different relationships between variables that are relevant for both sets of countries. Here, one can imagine that the response of the current account to a change in the fiscal stance is fundamentally different in low‐income countries than in high‐income countries for a variety of reasons, including themore pervasive role of government in the former than in the latter. In this paper, the results on the determination of the current account show that both of these sets of differences are possibly important. For