Wednesday, December 3, 2014 | 2:30pm-4:00pm | Room 337, HSBC Business School

Abstract

Trade imbalances are a key feature of the latest wave of globalization. For instance, the rise of China and its integration into the world economy were accompanied by large and growing trade surpluses. This raises the question of whether this type of trade integration harmed or benefited China and its main trade partners. Trade theory is generally silent on this important issue, as in most theoretical setups trade is balanced by assumption. The paper proposes a simple and yet general approach that allows one to discuss the welfare effects of trade opening and trade policy in the presence of trade imbalances.