On the employment, investment, and current account effects of trade liberalizations with durability in consumption

Arman Mansoorian and Mohammed Mohsin

The North American Journal of Economics and Finance, 2010, vol. 21, issue 3, 228-240

Abstract: The effects of trade liberalizations are studied for a small open economy in a model with durable goods. A trade liberalization increases the permanent income of the representative agent, because it removes trade distortions. The increase in permanent income leads to a corresponding increase in the steady state stock of durable goods, and a fall in labor supply. The fall in labor input reduces investment, which tends to generate a current account surplus. To increase the stock of durables savings falls, which tend to generate a current account deficit. The adjustment of the current account will likely be non-monotonic.

Keywords: Durable; goods; Investment; Current; account; Trade; liberalizations (search for similar items in EconPapers)
Date: 2010
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