While a reduction in import barriers in a partial equilibrium may be thought to lead to an increase in imports and a reduction in trade surplus, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified...

This paper develops a new theory of international economics by introducing Heckscher-Ohlin features of intra-temporal trade into an intertemporal trade approach of current account. To do so, we consider a dynamic general equilibrium model with tradable sectors of different factor intensities,...

Does finance follow the real economy, or the other way around? This paper unites the two competing schools of thought in a general equilibrium framework. Our key result is that there are threshold effects defined by a set of deep institutional parameters (cost of financial intermediation,...

This paper aims to provide a theory of current account adjustment that generalizes the textbook version of the intertemporal approach to current account and places domestic labor market institutions at the center stage. In general, in response to a shock, an economy adjusts through a combination...

This paper proposes a simple model to study the relationship between domestic institutions - financial system, corporate governance, and property rights protection - and patterns of international capital flows. It studies conditions under which financial globalization can be a substitute for...

International capital flows from rich to poor countries can be regarded as either too small (the Lucas paradox in a one-sector model) or too large (when compared with the logic of factor price equalization in a two-sector model). To resolve the paradoxes, we introduce a non-neo-classical model...

We use China's recent anti-corruption campaign as a natural experiment to examine the (market expected) equilibrium consequences of (anti-)corruption. We argue that the announcement of inspections of provincial governments by the Central Commission for Discipline Inspection (CCDI) on May 17,...

This paper proposes a concept of a global currency and introduces a "global currency pricing" specification into a standard N-country open economy macroeconomic model. A global currency is defined as a virtual unit of account that is exclusively used for international trade invoicing and is...

We explore how consumption heterogeneity affects the international transmission mechanism of monetary shocks and the choice of optimal monetary policy in an open economy. Incorporating two types of agents (Ricardian versus Keynesian) into a standard open economy macro model, we find that there...

Empirical evidence suggests that for many countries, retail prices of traded goods are sticky in national currencies. Movements in exchange rates then cause deviations from the law of one price, and exchange rate ëmisalignmentí, which cannot be corrected by monetary policy alone. This paper...