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on Open Economy Macroeconomic |
| By: | Ju, Jiandong (BOFIT); Shi , Kang (BOFIT); Wei , Shang-Jin (BOFIT) |
| Abstract: | 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: | F32 F49 |
| Date: | 2013–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2013_025&r=opm |
| By: | Timothy J. Kehoe; Kim J. Ruhl; Joseph B. Steinberg |
| Abstract: | Since the early 1990s, as the United States has borrowed from the rest of the world, employment in U.S. goods-producing sectors has fallen. Using a dynamic general equilibrium model, we find that rapid productivity growth in goods production, not U.S. borrowing, has been the most important driver of the decline in goods-sector employment. As the United States repays its debt, its trade balance will reverse, but goods-sector employment will continue to fall. A sudden stop in foreign lending in 2015–2016 would cause a sharp trade balance reversal and painful reallocation across sectors, but would not affect long-term structural change. |
| Keywords: | Trade |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:489&r=opm |
| By: | Timothy Uy; Kei-Mu Yi; Jing Zhang |
| Abstract: | We study the importance of international trade in structural change. Our framework has both productivity and trade cost shocks, and allows for non-unitary income and substitution elasticities. We calibrate our model to investigate South Korea's structural change between 1971 and 2005. We find that the shock processes, propagated through the model's two main transmission mechanisms, non-homothetic preferences and the open economy, explain virtually all of the evolution of agriculture and services labor shares, and the rising part of the hump-shape in manufacturing. Counterfactual exercises show that the role of the open economy is quantitatively important for explaining South Korea's structural change. |
| Keywords: | Gross domestic product ; Labor mobility ; Manufacturing industries |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2013-09&r=opm |
| By: | Wenbiao Cai; B. Ravikumar; Raymond Riezman |
| Abstract: | This paper deals with a classic development question: how can the process of economic development – transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology – be accelerated? Lewis (1954) and Rostow (1956) argue that the pace of industrialization is limited by the rate of capital formation which in turn is limited by the savings rate of workers close to subsistence. We argue that access to capital goods in the world market can be quantitatively important in speeding up the transition. We develop a parsimonious open-economy model where traditional and modern technologies coexist (a dual economy in the sense of Lewis (1954)). We show that a decline in the world price of capital goods in an open economy increases the rate of capital formation and speeds up the pace of industrialization relative to a closed economy that lacks access to cheaper capital goods. In the long run, the investment rate in the open economy is twice as high as in the closed economy and the per capita income is 23 percent higher. |
| Keywords: | Economic development ; Economic conditions |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2013-025&r=opm |
| By: | Ozge Akinci |
| Abstract: | This paper uses a panel structural vector autoregressive (VAR) model to investigate the extent to which global financial conditions, i.e., a global risk-free interest rate and global financial risk, and country spreads contribute to macroeconomic fluctuations in emerging countries. The main findings are: (1) Global financial risk shocks explain about 20 percent of movements both in the country spread and in the aggregate activity in emerging economies. (2) The contribution of global risk-free interest rate shocks to macroeconomic fluctuations in emerging economies is negligible. Its role, which was emphasized in the literature, is taken up by global financial risk shocks. (3) Country spread shocks explain about 15 percent of the business cycles in emerging economies. (4) Interdependence between economic activity and the country spread is a key mechanism through which global financial shocks are transmitted to emerging economies. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1085&r=opm |
| By: | Benjamin Keddad (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM)) |
| Abstract: | In this paper, I examine the extent to which the Asian exchange rates are coordinated around a synthetic Asian Currency Unit (ACU) defined as a basket of the Asian currencies. Using a VAR model, the results provide some evidence of stabilization among the Asian exchange rates around the ACU. Although the US dollar remains the dominant anchor within the region, these countries have allowed for more exchange rate flexibility against the US dollar since 2006, with the aim to adopt a basket peg where the Asian currencies have gained an increasing role. The empirical results also suggest that the official adoption of an undisclosed currency basket by Chinese authorities in July 2005 has been an important factor in the decision of Asian countries to shift toward a de facto currency basket system. |
| Keywords: | Asian Currency Unit; monetary integration; currency basket peg; nominal exchange rate coordination |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00862254&r=opm |
| By: | Gilles Dufrénot (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM)); Benjamin Keddad (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM)) |
| Abstract: | This paper attempts to analyze the relationships between the ASEAN-5 countries' business cycles. We examine the nature of business cycles correlation trying to disentangle between regional spillover effects (expansion and recession phases among the ASEAN-5 are correlated) and global spillovers where the business cycles of other countries (China, Japan and the US) play an important role in synchronizing the activity within the ASEAN-5. We employ a time-varying transition probability Markov switching framework in order to allow the degree of synchronization to fluctuate over time and across the phases of the business cycles. We provide evidence that the signals contained in some leading business cycles can impact the ASEAN-5 countries' individual business cycles. |
| Keywords: | OCA; East Asia; business cycle synchronization; monetary union; markov-switching |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00861901&r=opm |