Romelli, Davide
[VerfasserIn]
;
Terra, Cristina
[Sonstige Person, Familie und Körperschaft];
Vasconcelos, Enrico
[Sonstige Person, Familie und Körperschaft]
Current account and real exchange rate changes
: The impact of trade openness
Anmerkungen:
In: European Economic Review, Vol. 105, No. June, 2018
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 29, 2015 erstellt
Beschreibung:
In the transfer problem debate with Keynes, Ohlin suggests that income effects should lessen relative price variations necessary to produce trade surpluses, and that that impact is related to the degree of openness of the economy. We illustrate this mechanism in a simple model, and take it to the data. First, using data for developed and emerging economies for the period 1970-2011, we identify events of sudden stops of capital flows and of abrupt real exchange rate depreciations. Then, we investigate the relationship between openness to trade, real exchange rate depreciations, and changes in current account and trade balances during these events. We find that, controlling for real exchange rate changes, more open economies experience a larger increase in current account and trade balances. In other words, our results indicate that improvements in current account and trade balances are accompanied by a smaller real exchange rate depreciation in more open economies