IDEAS home Printed from https://ideas.repec.org/p/unu/wpaper/wp-1986-005.html
   My bibliography  Save this paper

Liberalization of Capital Movements and Trade: Real Appreciation, Employment and Welfare

Author

Listed:
  • Pertti Haaparanta
  • Juha Kähkönen

Abstract

A two-period, two-sector optimizing model is used to study the effects of liberalization of trade and capital movements on the real exchange rate, unemployment, and welfare. The mechanism creating unemployment is assumed to be real wage rigidity caused by wage indexation. Due to this distortion, neither free trade nor free capital mobility is in general optimal. It is shown that in the short run liberalization leads to real appreciation while in the long run the picture is not as clear especially regarding trade liberalization.

Suggested Citation

  • Pertti Haaparanta & Juha Kähkönen, 1986. "Liberalization of Capital Movements and Trade: Real Appreciation, Employment and Welfare," WIDER Working Paper Series wp-1986-005, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-1986-005
    as

    Download full text from publisher

    File URL: https://www.wider.unu.edu/sites/default/files/WP5.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jeremy Greenwood & Kent P. Kimbrough, 1985. "Capital Controls and Fiscal Policy in the World Economy," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 743-765, November.
    2. Buffie, Edward F., 1984. "The macroeconomics of trade liberalization," Journal of International Economics, Elsevier, vol. 17(1-2), pages 121-137, August.
    3. Buffie, Edward F, 1985. "Price-Output Dynamics, Capital Inflows and Real Appreciation," Oxford Economic Papers, Oxford University Press, vol. 37(4), pages 529-551, December.
    4. Edwards, Sebastian & van Wijnbergen, Sweder, 1986. "The Welfare Effects of Trade and Capital Market Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 141-148, February.
    5. J. Peter Neary, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 551-570.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sebastian Edwards, 1987. "Tariffs, Terms or Trade, and The Real Exchange Rate in and Intertemporal Optimizing Model of the Current Account," UCLA Economics Working Papers 429, UCLA Department of Economics.
    2. Sebastian Edwards, 1987. "Anticipated Protectionist Policies, Real Exchange Rates and the Current Account," UCLA Economics Working Papers 437, UCLA Department of Economics.
    3. Grzegorz W. Kolodko & Marian Ostrowski & Dariusz Rosati, 1990. "Stabilization Policy in Poland: Challenges and Constraints," WIDER Working Paper Series wp-1990-081, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sebastian Edwards, 1987. "Tariffs, Terms or Trade, and The Real Exchange Rate in and Intertemporal Optimizing Model of the Current Account," UCLA Economics Working Papers 429, UCLA Department of Economics.
    2. Cardenas, Mauricio & Barrera, Felipe, 1997. "On the effectiveness of capital controls: The experience of Colombia during the 1990s," Journal of Development Economics, Elsevier, vol. 54(1), pages 27-57, October.
    3. Sebastian Edwards, 1990. "On Uniform Import Tariffs in Developing Countries," NBER Working Papers 3347, National Bureau of Economic Research, Inc.
    4. Svensson, Lars E.O., 1984. "Factor trade and goods trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 365-378, May.
    5. Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Immigration and Native Welfare," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 10, pages 335-372, World Scientific Publishing Co. Pte. Ltd..
    6. van Wijnbergen, Sweder, 1992. "Trade Reform, Policy Uncertainty, and the Current Account: A Non-Expected-Utility Approach," American Economic Review, American Economic Association, vol. 82(3), pages 626-633, June.
    7. Sebastian Edwards, 1987. "Economics Liberalization and the Equilibrium Real Exchange Rate in Developing Countries," UCLA Economics Working Papers 433, UCLA Department of Economics.
    8. Conley, John P. & Maloney, William F., 1995. "Optimal sequencing of credible reforms with uncertain outcomes," Journal of Development Economics, Elsevier, vol. 48(1), pages 151-166, October.
    9. Bai, Xue & Chatterjee, Arpita & Krishna, Kala & Ma, Hong, 2021. "Trade and minimum wages in general equilibrium: Theory and evidence," Journal of International Economics, Elsevier, vol. 133(C).
    10. Ethier, Wilfred J. & Svensson, Lars E. O., 1986. "The theoremes of international trade with factor mobility," Journal of International Economics, Elsevier, vol. 20(1-2), pages 21-42, February.
    11. Gan, Li & Hernandez, Manuel A. & Ma, Shuang, 2016. "The higher costs of doing business in China: Minimum wages and firms' export behavior," Journal of International Economics, Elsevier, vol. 100(C), pages 81-94.
    12. Frenkel, Jacob A & Razin, Assaf, 1987. "Fiscal Policies and the World Economy; An Intertemporal Approach (Cambridge, Mass.: MIT Press, 1987)," MPRA Paper 20438, University Library of Munich, Germany.
    13. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2024. "Regulatory Stringency and Emission Leakage Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(6), pages 1407-1424, June.
    14. C. Martinelli & M. Tommasi, 1997. "Sequencing of Economic Reforms in the Presence of Political Constraints," Economics and Politics, Wiley Blackwell, vol. 9(2), pages 115-131, July.
    15. Ronald Fischer, 1999. "Income distribution and Trade Liberalization," Documentos de Trabajo 67, Centro de Economía Aplicada, Universidad de Chile.
    16. Buiter, Willem H., 1986. "Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions," CEPR Discussion Papers 93, C.E.P.R. Discussion Papers.
    17. Cuddington, John T & Liang, Hong & Lu, Shihua, 1996. "Uncertainty, Trade, and Capital Flows in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 5(3), pages 192-224, October.
    18. Jürgen Meckl, 2006. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade: Comment," American Economic Review, American Economic Association, vol. 96(5), pages 1924-1930, December.
    19. Rod Falvey & Udo Kreickemeier, 2017. "Tariff Reforms with Rigid Wages," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 4, pages 95-116, World Scientific Publishing Co. Pte. Ltd..

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:wp-1986-005. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Siméon Rapin (email available below). General contact details of provider: https://edirc.repec.org/data/widerfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.