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Current Account Adjustment: Some New Theory and Evidence Author info | Abstract | Publisher info | Download info | Related research | Statistics Jiandong Ju
Shang-Jin Wei
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This paper aims to provide a theory of current account adjustment that generalizes the textbook version of the intertemporal approach to current account and places domestic labor market institutions at the center stage. In general, in response to a shock, an economy adjusts through a combination of a change in the composition of goods trade (i.e., intra-temporal trade channel) and a change in the current account (i.e., intertemporal trade channel). The more rigid the labor market, the slower the speed of adjustment of the current account towards its long-run equilibrium. Three pieces of evidence are provided that are consistent with the theory.
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Date of creation: Sep 2007Date of revision:
Handle: RePEc:nbr:nberwo:13388Note: IFM ITIContact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
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Find related papers by JEL classification: E00 - Macroeconomics and Monetary Economics - - General - - - General F3 - International Economics - - International Finance F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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