Current Account Adjustment: Some New Theory and Evidence / Jiandong Ju, Shang-Jin Wei.

Format:

Book

Author/Creator:

Ju, Jiandong.

Contributor:

National Bureau of Economic Research.

Wei, Shang-Jin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13388.

NBER working paper series no. w13388

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Current Account Adjustment

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

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:

Print version record

September 2007.