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Asymmetric Trade Liberalizations and Current Account Dynamics

Author

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  • Alessandro Barattieri

Abstract

In this paper, I show a strong positive correlation between the value-added share of manufacturing in 2000 and current account balances in 2007 for the Euro area countries. I propose asymmetries in the timing of trade liberalizations as a new mechanism affecting the dynamics of the current account. I build intuition using a simple model. Then, I use an international business cycle model to show how the asymmetric dynamics of trade costs in manufacturing and services in 2000-2007 can partially explain the rise in the German surplus. Lastly, I provide broad empirical support for the key predictions of the theory.

Suggested Citation

  • Alessandro Barattieri, 2016. "Asymmetric Trade Liberalizations and Current Account Dynamics," Carlo Alberto Notebooks 447, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:447
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    File URL: http://www.carloalberto.org/assets/working-papers/no.447.pdf
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    More about this item

    Keywords

    Current Account Dynamics; Relative Trade Liberalization Measures;

    JEL classification:

    • F1 - International Economics - - Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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