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The Causes of and Gains from Intertemporal Trade

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  • William D. Craighead
  • Norman C. Miller

Abstract

The authors show how the causes of and the gains from current account imbalances can be integrated into undergraduate economics courses using the same pedagogical tools that are used to explain comparative advantage and the gains from trade. A nonzero current account provides a mechanism for intertemporal trade, and a country has a comparative advantage in present (or future) goods if its autarky real interest rate is below (or above) the world real interest rate. The authors explain why the intertemporal approach to the current account reaches different conclusions from the traditional approach regarding welfare effects. Also, the authors integrate alternative approaches for explaining the underlying cause(s) of nonzero current account balances.

Suggested Citation

  • William D. Craighead & Norman C. Miller, 2010. "The Causes of and Gains from Intertemporal Trade," The Journal of Economic Education, Taylor & Francis Journals, vol. 41(3), pages 275-291, June.
    • Handle: RePEc:taf:jeduce:v:41:y:2010:i:3:p:275-291
    DOI: 10.1080/00220485.2010.486732
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    References listed on IDEAS

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    1. Norman C. Miller, 2002. "Balance of Payments and Exchange Rate Theories," Books, Edward Elgar Publishing, number 2692.
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