On the connection between intertemporal and intra-temporal trades
By: Jiandong Ju, Kang Shi, Shang-Jin Wei
Contributors: Shi, Kang; Wei, Shang-Jin; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17549; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17549.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Sticky (or slow-adjusting) current accounts are observed in many countries.  This paper explores the role of domestic factor market flexibility in understanding the phenomenon.  To do so, we consider multiple tradable sectors with different factor intensities and allow substitution between intertemporal trade (current account adjustment) and intra-temporal trade (goods trade) in a dynamic general equilibrium model.  An economy's response to a shock generally involves a combination of a change in the composition of goods trade and a change in the current account.  Flexible factor markets reduce the need for the current account to adjust.  On the other hand, the more rigid the factor markets, the larger the size of current account adjustment relative to the volume of goods trade, and the slower the speed of adjustment of the current account towards its long-run equilibrium.  We present empirical evidence in support of the theory"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 1/10/2012.

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