Trade Reforms and Current Account Imbalances: When Does the General Equilibrium Effect Overturn a Partial Equilibrium Intuition?
AbstractWhile a reduction in import barriers in a partial equilibrium may be thought to lead to an increase in imports and a reduction in trade surplus, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified Heckscher-Ohlin structure and an endogenous discount factor into an intertemporal model of current account. We show that trade liberalizations in a developing country would generally lead to capital outflow. In contrast, trade liberalizations in a developed country would result in capital inflow. Thus, efficient trade reforms can contribute to global current account imbalances, but these imbalances do not need policy "corrections"
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18653.
Date of creation: Dec 2012
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- F2 - International Economics - - International Factor Movements and International Business
- F3 - International Economics - - International Finance
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467, U.S. Bureau of Labor Statistics.
- Mina Kim & Deokwoo Nam & Jian Wang & Jason Wu, 2013. "International trade price stickiness and exchange rate pass-through in micro data: a case study on U.S.–China trade," Globalization and Monetary Policy Institute Working Paper 135, Federal Reserve Bank of Dallas.
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