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Book Cover
Author Méjean, Isabelle, author

Title Current account rebalancing and real exchange rate adjustment between the U.S. and emerging Asia / Isabelle Méjean, Pau Rabanal, and Damiano Sandri
Published [Washington, D.C.] : International Monetary Fund, [2011]
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Description 1 online resource (30 pages)
Series IMF working paper ; WP/11/46
IMF working paper ; WP/11/46
Contents Cover Page; Title Page; Copyright Page; Contents; I Introduction; II The model; A Simplified version with two countries and only tradable goods; B Three country version of Obstfeld and Rogoff (2007); 1 U.S. households; 2 Chinese and OEA households; 3 Market clearing; III Calibration; A Trade elasticities; B Other parameters; 1 Calibration; IV Rebalancing and relative prices; A Exchange rate adjustment; 1 Responses to a reduction in the U.S. current account deficit; B Robustness; 2 Sensitivity to lower U.S. elasticity between domestic and foreign goods; C Change in home bias
3 Change in home bias required to accommodate a reduction in the U.S. deficitV Introducing input-output linkages; A Evidence; B Extension of the model; 4 Shares of domestic and imported intermediate inputs in tradable production; C Exchange rate adjustment with input-output linkages; 5 Sensitivity to one-way IO linkages with a unilateral Chinese appreciation; 6 Sensitivity to two-way IO linkages with a unilateral Chinese appreciation; VI Concluding remarks; I System of equations; Footnotes
Summary A reduction in the U.S. current account deficit vis-a-vis emerging Asia involves a shift in demand from U.S. to emerging Asia tradable goods and a change in international relative prices. This paper quantifies the required adjustment in the terms of trade and real exchange rates in a three-country open economy model of the U.S., China, and other emerging Asia. We compare scenarios where both Chinese and other emerging Asian export prices change by the same proportion to the case where export prices remain constant in one country and increase in the other. Our results are robust to different assumptions about elasticities of substitution and to introducing a high degree of vertical fragmentation in production in the model
Bibliography Includes bibliographical references
Subject Balance of payments -- Asia -- Econometric models.
Balance of payments -- United States -- Econometric models.
Balance of trade -- Asia -- Econometric models.
Balance of trade -- United States -- Econometric models.
Foreign exchange rates -- Asia -- Econometric models.
Foreign exchange rates -- United States -- Econometric models.
Form Electronic book
Author Rabanal, Pau, author
Sandri, Damiano, author
International Monetary Fund. Research Department, issuing body
ISBN 1283558637
1455222011 (E-Book)