This paper sets out a basic heterogeneous-firms trade model that is closely akin to Melitz (2003). The positive and normative properties of the model are studied in a manner intended to highlight the core economic logic of the model. The paper also studies the impact of greater openness at the...

Globalisation affects the functioning of the macroeconomy. The macroeconomy's functioning, in turn, conditions the conduct and impact of monetary policy. This is why globalisation matters for central banks. It is also why central bankers should pay attention to the evolution of globalisation....

Revolutionary transformations of industry and trade occurred from 1985 to the late-1990s - the regionalisation of supply chains. Before 1985, successful industrialisation meant building a domestic supply chain. Today, industrialisers join supply chains and grow rapidly because offshored...

Unilateral tariff liberalisation by developing nations is pervasive but our understanding of it is shallow. This paper strives to partly redress this lacuna on the theory side by introducing three novel political economy mechanisms with particular emphasis is on the role of production...

Small Think Regionalism focused on the Vinerian question: "Would a nation gain from joining a trade bloc?" Big Think Regionalism considers regionalism's systemic impact on the world trading system, focusing mainly on two questions: "Does spreading regionalism harm world welfare?" and "Does...

This paper addresses the final steps to global free trade -- the political economy forces that might drive them, and the role the WTO might play in guiding them. Two facts form the departure point: 1) Regionalism is here to stay; 2) the motley assortment of regional trade agreements is not the...

Regional liberalization sweeps the globe like wildfire while multilateral trade talks proceed at a glacial pace. Why are countries eager to liberalize regionally but reluctant to do so multilaterally? The answer of the GATT-is-dead school is that multilateralism is too cumbersome for...

This paper presents an explicit model of the link between the 1992 market liberalization and the aggregate marginal productivity of EC capital. We show that the liberalization is likely to lead to a ceteris paribus rise in capital's marginal product and thereby raise the steady-state...

Productive factors such as human and physical capital are accumulated and trade can affect the steady-state levels of such factors. Consequently, trade liberalization will have dynamic effects on output and welfare as the economy moves to its new steady state, in addition to its usual static...

Despite its important theoretical, empirical and policy implications, sunk-cost hysteresis has not been characterized for the case of model consistent, or rational expectations (previous studies assume that firms believe the forcing variable is generated by some ad hoc, time invariant process...