Permanent shocks such as trade liberalizations are hard to discuss in a standard dynamic Hechscher-Ohlin model due to potential interest rate over-determination. We make three contributions. First, we introduce an endogenous discount factor which solves the problem of interest rate...

In partial equilibrium, a reduction in import barriers may be thought to lead to an increase in imports and a reduction in trade surplus. However, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified...

While a reduction in import barriers in a partial equilibrium may be thought to lead to an increase in imports and a reduction in trade surplus, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified...