Deregulation and the current account

Philipp Harms

No 315, Discussion Papers, Series I from University of Konstanz, Department of Economics

Abstract: This paper studies how removing barriers to competition in the nontraded goods sector affects the current account, the real exchange rate, and factor prices in a small open economy. We show that the expansion of the nontraded sector that results from a deregulation shock is associated with an accumulation of foreign assets unless production of nontraded goods is very capital-intensive. Moreover, while the real exchange rate decreases monotonically towards its new steady state, the real wage may temporarily overshoot its long-run level.

Keywords: deregulation; imperfect competition; current account; nontraded goods (search for similar items in EconPapers)
JEL-codes: D43 F32 F41 (search for similar items in EconPapers)
Date: 2001
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Related works:
Working Paper: Deregulation and the Current Account (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp1:315

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