IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

True exposure: The analytics of trade liberalization in a general equilibrium framework

Listed author(s):
  • Sell, Friedrich L.
Registered author(s):

    These is an ongoing debate with regard to the Timing and Sequencing of Liberalization in LDC's. The Capital Account or Trade Account First'-Puzzle is tackled with different methodological tools of analysis, ranging from the Political Economy Approach put forward by D. Lai (1987) to the orthodox Price and Resource Movement Analysis by S. Edwards (1986). D. Lai favours a sequencing in which exchange controls are removed first, introducing a free floating exchange rate, and a phased program of trade liberalization should follow. If, instead, trade liberalization is accompanied by a managed exchange rate system requiring capital controls, the real exchange rate will be affected severely by the nominal exchange rates chosen by the government. These choices, in turn, will seldom correspond to the economic requirements as reflected in the balance of payments. When deficits occur, governments may then be tempted to impose new trade controls - thus aborting the trade liberalization (Lai 1987, p. 290). S. Edwards, on the other hand, comes to the conclusion that both types of liberalization, on their own, generate by tendency opposite effects on prices, production, factor allocation and income distribution. As resource movements are not for free, net reallocation costs can be minimized by synchronising the opening of the capital and current accounts. However, given the fact that the capital account tends to adjust faster than the current account, the synchronization of the economic effects of opening both accounts will require that the current account is opened first (Edwards 1986, p. 210).

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Working Papers with number 312.

    in new window

    Date of creation: 1988
    Handle: RePEc:zbw:ifwkwp:312
    Contact details of provider: Postal:
    Kiellinie 66, D-24105 Kiel

    Phone: +49 431 8814-1
    Fax: +49 431 8814528
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May.
    2. Sweder Wijnbergen, 1984. "Oil price shocks and the current account: An analysis of short run adjustment measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(3), pages 460-480, September.
    3. Mussa, Michael, 1987. "Macroeconomic Policy and Trade Liberalization: Some Guidelines," World Bank Research Observer, World Bank Group, vol. 2(1), pages 61-77, January.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:312. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.