Author

Contributions

  • Wei, Shang-Jin. - Contributor
  • National Bureau of Economic Research. - Contributor

Publication

2007 - National Bureau of Economic Research, Cambridge, Mass, Massachusetts

Language

English

Word Count

15,250 words, Guess

Page Count

61 pages

Identifiers

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.

Subjects

Series Statement

  • NBER working paper series -- no. 13388.
  • Working paper series (National Bureau of Economic Research) -- working paper no. 13388.

Links

Other Editions

  • Current account adjustment: some new theory and evidenceNational Bureau of Economic Research2007-01-01

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