Current account adjustment
Subtitle: some new theory and evidence
By: Jiandong Ju, Shang-Jin Wei.
Contributors: Wei, Shang-Jin.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13388.; Working paper series (National Bureau of Economic Research) -- working paper no. 13388.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 61
Subjects: Monetary policy
Description: 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 of a change in the composition of goods trade (i.e., intra-temporal trade channel) and a change in the current account (i.e., intertemporal trade channel). The more rigid the labor market, the slower the speed of adjustment of the current account towards its long-run equilibrium. Three pieces of evidence are provided that are consistent with the theory.
Notes: "September 2007"

Includes bibliographical references (p. 42-45).

Also available in PDF from the NBER world wide web site (www.nber.org).