IDEAS home Printed from https://ideas.repec.org/p/szg/worpap/0207.html
   My bibliography  Save this paper

Deregulation and the Current Account

Author

Listed:
  • Philipp Harms

    (University of Konstanz and Studienzentrum Gerzensee)

Abstract

In this paper we use a dynamic general-equilibrium model to study how removing barriers to competition in the nontraded goods sector affects the current account, the real exchange rate, and the factor prices in a small open economy. We show that the expansion of the nontraded sector that results from a "deregulation shock" is associated with an accumulation of foreign assets unless production of nontraded goods is very capital-intensive. Moreover, while the real exchange rate decreases monotonically towards its new steady state, the real wage may temporarily overshoot its long-run level.

Suggested Citation

  • Philipp Harms, 2002. "Deregulation and the Current Account," Working Papers 02.07, Swiss National Bank, Study Center Gerzensee.
    • Handle: RePEc:szg:worpap:0207
    as

    Download full text from publisher

    File URL: http://www.szgerzensee.ch/fileadmin/Dateien_Anwender/Dokumente/working_papers/wp-0207.pdf
    File Function: Full text
    Download Restriction: None
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, December.
    2. Philip L. Brock, 1996. "International Transfers, the Relative Price on Non-Traded Goods, and the Current Account," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 163-180, February.
    3. Brock, Philip L & Turnovsky, Stephen J, 1994. "The Dependent-Economy Model with Both Traded and Nontraded Capital Goods," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 306-325, October.
    4. Sebastian Edwards, 1987. "Tariffs, Terms of Trade, and the Real Exchange Rate in an Intertemporal Optimizing Model of the Current Account," NBER Working Papers 2175, National Bureau of Economic Research, Inc.
    5. Coto-Martinez, Javier & Dixon, Huw, 2003. "Profits, markups and entry: fiscal policy in an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 573-597, February.
    6. Lane, Philip R., 2001. "The new open economy macroeconomics: a survey," Journal of International Economics, Elsevier, vol. 54(2), pages 235-266, August.
    7. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
    8. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-831, November.
    9. Christian Keuschnigg, 1996. "Overshooting adjustment to tariff liberalization," Open Economies Review, Springer, vol. 7(3), pages 237-255, July.
    10. Brock, Philip L., 1988. "Investment, the current account, and the relative price of non-traded goods in a small open economy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 235-253, May.
    11. Gavin, Michael, 1991. "Tariffs and the current account : On the macroeconomics of commercial policy," Journal of Economic Dynamics and Control, Elsevier, vol. 15(1), pages 27-52.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hung‐Ju Chen & Chen‐Min Hsu, 2009. "Demand Changes and Real Exchange Rate Dynamics in a Finite‐Horizon Model with Sectoral Adjustment Costs," Southern Economic Journal, John Wiley & Sons, vol. 75(4), pages 1191-1211, April.
    2. Walter H. Fisher, 2005. "Current Account Dynamics in a Small Open‐Economy Model of Status Seeking," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 262-282, May.
    3. Serven, Luis, 1995. "Capital goods imports, the real exchange rate and the current account," Journal of International Economics, Elsevier, vol. 39(1-2), pages 79-101, August.
    4. Temple, Jonathan & Van de Sijpe, Nicolas, 2017. "Foreign aid and domestic absorption," Journal of International Economics, Elsevier, vol. 108(C), pages 431-443.
    5. Heijdra, Ben J. & Ligthart, Jenny E., 2010. "The Transitional Dynamics Of Fiscal Policy In Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 14(1), pages 1-28, February.
    6. Walter H. Fisher, 2004. "Status Preference, Wealth and Dynamics in the Open Economy," German Economic Review, Verein für Socialpolitik, vol. 5(3), pages 335-355, August.
    7. Santanu Chatterjee & Stephen J. Turnovsky, 2023. "Government expenditure and informality in an emerging economy: the recent experience of India," Indian Economic Review, Springer, vol. 58(2), pages 293-318, September.
    8. Fender, John & Yip, Chong K., 2000. "Tariffs and exchange rate dynamics redux," Journal of International Money and Finance, Elsevier, vol. 19(5), pages 633-655, October.
    9. Keuschnigg, Christian & Kohler, Wilhelm K., 1991. "An intertemporal CGE model for Austria: Model structure and calibration," Discussion Papers, Series II 152, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    10. Valerie Cerra & Serpil Tekin & Stephen Turnovsky, 2009. "Foreign Transfers and Real Exchange Rate Adjustments in a Financially Constrained Dependent Economy," Open Economies Review, Springer, vol. 20(2), pages 147-181, April.
    11. Fisher, Walter H. & Hof, Franz X., 2005. "Status seeking in the small open economy," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 209-232, June.
    12. Serpil Bouza & Stephen J. Turnovsky, 2012. "The Effects of Foreign Transfers with Flexible Labor Supply," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 1(1), pages 1-39, January.
    13. Chatterjee, Santanu & Mursagulov, Azer, 2016. "Fiscal Policy And The Real Exchange Rate," Macroeconomic Dynamics, Cambridge University Press, vol. 20(7), pages 1742-1770, October.
    14. Mahbub Morshed, A. K. M. & Turnovsky, Stephen J., 2004. "Sectoral adjustment costs and real exchange rate dynamics in a two-sector dependent economy," Journal of International Economics, Elsevier, vol. 63(1), pages 147-177, May.
    15. Santanu Chatterjee & Mark C. Kelly & Stephen J. Turnovsky, 2022. "Foreign aid, public investment, and the informal economy," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 174-201, January.
    16. Mansoorian Arman & Neaime Simon, 2002. "Habits And Durability In Consumption And The Effects Of Exchange Rate Policies," International Economic Journal, Taylor & Francis Journals, vol. 16(2), pages 97-114.
    17. Brock, Philip L., 2011. "The Penn-Balassa-Samuelson effect through the lens of the dependent economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1547-1556, September.
    18. Yoshiyasu Ono, 2014. "International Economic Interdependence and Exchange-rate Adjustment under Persistent Stagnation," The Japanese Economic Review, Japanese Economic Association, vol. 65(1), pages 70-92, March.
    19. David Oxborrow & Stephen J. Turnovsky, 2017. "Closing the Small Open Economy Model: A Demographic Approach," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 44-75, February.
    20. Stefan Ried, 2009. "Putting Up a Good Fight: The Galí-Monacelli Model versus “The Six Major Puzzles in International Macroeconomicsâ€," SFB 649 Discussion Papers SFB649DP2009-020, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:szg:worpap:0207. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: library (email available below). General contact details of provider: https://szgerzensee.ch/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.