TY  - JOUR
AU  - Ju,Jiandong
AU  - Shi,Kang
AU  - Wei,Shang-Jin
TI  - Trade Reforms and Current Account Imbalances: When Does the General Equilibrium Effect Overturn a Partial Equilibrium Intuition?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18653
PY  - 2012
Y2  - December 2012
UR  - http://www.nber.org/papers/w18653
L1  - http://www.nber.org/papers/w18653.pdf
N1  - Author contact info:
Jiandong Ju
Department of Economics
University of Oklahoma
Norman, OK  73019
E-Mail: jdju@ou.edu

Kang Shi
Department of Economics
Chinese University of Hong Kong
Shatin, New Territories
Hong Kong
E-Mail: kangshi@cuhk.edu.hk

Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - 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 Heckscher-Ohlin structure and an endogenous discount factor into an intertemporal model of current account. We show that trade liberalizations in a developing country would generally lead to capital outflow. In contrast, trade liberalizations in a developed country would result in capital inflow. Thus, efficient trade reforms can contribute to global current account imbalances, but these imbalances do not need policy "corrections"
ER  -