Time-intensive R&D and unbalanced trade
This paper highlights a novel mechanism that generates global imbalances. It develops a general equilibrium trade model with one of two countries having a comparative advantage in a sector whose production is characterized by (i) rapid, anticipated demand growth and (ii) large up-front R&D costs...
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| Format: | UnknownFormat |
| Sprache: | eng |
| Veröffentlicht: |
Zurich
Swiss National Bank
2015
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| Schriftenreihe: | SNB working papers
2015,11 |
| Schlagworte: | |
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Tag hinzufügen | Zusammenfassung: | This paper highlights a novel mechanism that generates global imbalances. It develops a general equilibrium trade model with one of two countries having a comparative advantage in a sector whose production is characterized by (i) rapid, anticipated demand growth and (ii) large up-front R&D costs. International funding of the accruing R&D costs generates capital inflows in the R&D stage, which are balanced by subsequent outflows. Importantly, sector-level growth does not generate growth differentials between countries, typically regarded as rationales of global imbalances. Additionally, it is shown that a trade surplus can coincide with appreciations of the real exchange rate. I argue that Switzerland's trades surplus, which was driven to record heights during 2010-2014 by pharmaceutical exports, exemplifies this mechanism. Calibrating the model to Swisstrade flows underpins this argument. |
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| Beschreibung: | Parallel als Online-Ausg. erschienen |
| Beschreibung: | 31 S. graph. Darst. |