Terms-of-trade, factor intensities and the current account in a life-cycle model

Kiminori Matsuyama*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

36 Scopus citations

Abstract

This paper examines the effects of terms-of-tradc changes on the external adjustment of a small open economy where each consumer has a life-cycle saving function. The supply side of the economy is given by the standard two-sector model with two primary factors: Labour and capital. It is shown that, when both commodities are produced, a terms-of-trade deterioration leads to a current account deficit (surplus) if the export (import) sector is more labour intensive.

Original languageEnglish (US)
Pages (from-to)247-262
Number of pages16
JournalReview of Economic Studies
Volume55
Issue number2
DOIs
StatePublished - Jan 1 1988

ASJC Scopus subject areas

  • Economics and Econometrics

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