Trade reforms and current account imbalances
Ju, Jiangdong; Shi, Kang; Wei, Shang-Jin (05.09.2013)
Numero
25/2013Julkaisija
Bank of Finland
2013
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201408072212Tiivistelmä
In partial equilibrium, a reduction in import barriers may be thought to lead to an increase in imports and a reduction in trade surplus. However, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified Heckscher-Ohlin structure and an endogenous discount factor into an intertemporal model of current account. We show that trade liberalizations in a developing country would generally lead to capital outflow. In contrast, trade liberalizations in a developed country would result in capital inflow. Thus, efficient trade reforms can contribute to global current account imbalances, but these imbalances do not need policy "corrections". JEL Classification Numbers: F3 and F4
Julkaisuhuomautus
Published in Journal of International Economics, Volume 92, Supplement 1, April 2014, Pages S36–S51 as On the connections between intra-temporal and intertemporal trades