This paper investigates whether China can benefit from a trade surplus (deficit) in one period and use it to pay off the debt in the next period by manipulating the exchange rates. If marginal utility of income is nonincreasing in the exchange rate, then the optimal exchange rates are the...

Cross-pollination can be caused by birds, insects and wind. Genetically modified (GM) seeds are produced each year in a controlled environment to maintain their purity. However, pollen from the GM crop can be transferred to traditional crops. When the GM crop producers are in long-run...

This paper investigates the possible gains from currency intervention by central banks using atwo-period framework in which a trade surplus in one period must be offset by a trade deficitin the next period. It is shown that when the interest rate is zero, the optimal policy isnonintervention. If...

We employ an open economy general equilibrium model to investigate the effects of government energy policy, with an emphasis on corn-based ethanol, on the U.S. economy. The model specification incorporates world and domestic markets, assumes pollution costs from fuel consumption, and allows...

This paper provides an overview of the economics of biofuels. It starts by describing the remarkable growth of the biofuel industry over the last decade, with emphasis on developments in the United States, Brazil and the European Union, and it identifies the driving role played by some critical...

This paper investigates outsourcing and foreign direct investment (FDI)decisions based on factor price differentials in North-South trade when the productionis fragmented into two independent processes.  It is shown that (a) when the Southern firm does not have the Northern firm-specific...

This paper considers the question of whether a country with the intermediate capital–laborratio is better off forming a free trade area with the higher or lower wage country. Typicalanalyses of gains from trade ignore the effects of free trade on factor prices. When Europe formsa free...

This paper investigates outsourcing and foreign direct investment (FDI) decisions in North–South trade under conditions of wage uncertainty. The North has a financial advantage to raise capital, but the South has the advantage of low wages. If the expected outsourcing cost is lower than...

China’s currency policy has been criticized for its apparent pursuit of mercantile advantage by artificially stimulating exports, which potentially have adverse effects on other economies. While China’s currency policy may have positive output effects, there may be additional...

This paper investigates the role of infrastructure aid to developing countries in a 3x2 model with two traded goods and a nontraded good, with the focus of analysis placed on the effects on real national income and the Dutch disease effect.  It is shown that for a recipient country,...