This paper examines how China's exports are affected by exchange rate shocks from countries who supply intermediate inputs to China. We build a simple small open economy model with intermediate goods trade to show that due to the intraregional trade in intermediate goods, a devaluation of other...

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...

Permanent shocks such as trade liberalizations are hard to discuss in a standard dynamic Hechscher-Ohlin model due to potential interest rate over-determination. We make three contributions. First, we introduce an endogenous discount factor which solves the problem of interest rate...

This paper quantifies the effects of China’s trade reforms on the current account in its post-WTO period since 2001. We first present cross-country evidence to show that the adjustment of the current account to WTO access in China differs from those in other countries, exhibiting a hump-shaped...