Time-intensive R&D and unbalanced trade

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• 作者：Philip Sauré
• 关键词：F12 ; F41
• 刊名：European Economic Review
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：91
• 期：Complete
• 页码：229-244
• 全文大小：566 K
• 卷排序：91

文摘

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 trade surplus, which was driven to record heights during 2010–2014 by pharmaceutical exports, exemplifies this mechanism. Calibrating the model to Swiss trade flows underpins this argument.