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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
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    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

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