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The Origins of Global Imbalances

Jan Bruha () and Jiri Podpiera

Working Papers from Czech National Bank

Abstract: In this paper we study the endogenous response of unequally developed regions to a drop in investment and trade costs in a general equilibrium model. The response is characterized by a rise in foreign direct investment in the underdeveloped region and increased consumption in the developed one, leading to trade imbalances between the regions. We hereby propose that declining investment and trade costs could have caused this century’s global imbalances.

Keywords: Economic development; foreign direct investment; global imbalances; multi-country general-equilibrium model. (search for similar items in EconPapers)
JEL-codes: F12 F21 F34 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2008-12
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