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...

Based on a survey that we designed and that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, this paper examines the presence of systematic distortions in capital allocation that result in uneven marginal returns to...

This paper examines two related issues: (a) the implicit methodology used by the U.S. Treasury in determining whether China and America's other trading partners manipulate their exchange rates, and (b) the nature of the Chinese exchange rate regime since July 2005. On the first issue, we...

While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To...

Traditional explanations for indirect trade through an entrepot have focused on savings in transport costs and on the role of specialized agents in processing and distribution. We provide an alternative perspective based on the possibility that entrepots may facilitate tariff evasion. Using data...

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...

Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had conditions on trade reforms in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is...

The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies that have made it possible to trade in some business and computing services that were previously considered non-tradable. This paper estimates the effects of offshoring on...

The authors surveyed 41 firms in and around Moscow in the last two weeks of November 1992 to get an empirical handle on how firms are responding to the changing economic environment. They found the following conclusions. There were large negative (supply and demand) shocks to output for a...