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Varieties and imbalances: the extensive margins of the current account adjustment

Author

Listed:
  • Philippe Martin

    (Paris School of Economics, University of Paris 1 Panthéon-Sorbonne)

  • Paolo Pesenti

    (Federal Reserve Bank of New York)

  • Giancarlo Corsetti

    (European University Institute)

Abstract

are accounted for, relative to traditional macromodels. We also find that, for reasonable parameterizations, consumption and employment (hence welfare) are not highly sensitive to product differentiation, and change little regardless of whether adjustment occurs through movements in relative prices or quantities. This result warns against interpreting the size of real depreciation associated with trade rebalancing as an index of macroeconomic distress.

Suggested Citation

  • Philippe Martin & Paolo Pesenti & Giancarlo Corsetti, 2008. "Varieties and imbalances: the extensive margins of the current account adjustment," 2008 Meeting Papers 605, Society for Economic Dynamics.
  • Handle: RePEc:red:sed008:605
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    References listed on IDEAS

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    Cited by:

    1. Vahagn Galstyan & Philip R. Lane, 2008. "External Imbalances and the Extensive Margin of Trade," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 37(3), pages 241-257, November.

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