NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Kang Shi

Department of Economics
Chinese University of Hong Kong
Shatin, New Territories
Hong Kong

E-Mail: kangshi@cuhk.edu.hk
Institutional Affiliation: Chinese University of Hong Kong

NBER Working Papers and Publications

September 2018Exchange Rates, Local Currency Pricing and International Tax Policies
with Sihao Chen, Michael B. Devereux, Jenny Xu: w25111
Empirical evidence suggests that for many countries, retail prices of traded goods are sticky in national currencies. Movements in exchange rates then cause deviations from the law of one price, and exchange rate ëmisalignmentí, which cannot be corrected by monetary policy alone. This paper shows that a state contingent international tax policy can be combined with monetary policy to eliminate exchange rate misalignment and sustain a fully efficient welfare outcome. But this monetary-fiscal mix cannot be decentralized with non-cooperative determination of monetary and fiscal policy. Non-cooperative use of taxes and subsidies introduces strategic spillovers which opens up a fundamental conflict between the goals of output gap and inflation stabilization and those of terms of trade manipulat...
June 2013On the Connections between Intra-temporal and Intertemporal Trades
with Jiandong Ju, Shang-Jin Wei
in NBER International Seminar on Macroeconomics 2013, Richard Clarida, Gita Gopinath, and Lucrezia Reichlin, organizers
December 2012Trade Reforms and Current Account Imbalances: When Does the General Equilibrium Effect Overturn a Partial Equilibrium Intuition?
with Jiandong Ju, Shang-Jin Wei: w18653
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 over-determination. Second, we show that trade liberalization in a developing country generally leads to capital outflow, whereas it produces an opposite pattern for developed countries. Therefore, efficient trade reforms can contribute to global current account imbalances. Third, following a trade reform, the current account imbalance first widens and then falls back to zero. As an application, this model predicts an inverse-V-shape pattern for current account imbalances following China’s accession to the WTO: ...
October 2011On the Connections between Intertemporal and Intra-temporal Trades
with Jiandong Ju, Shang-Jin Wei: w17549
This paper develops a new theory of international economics by introducing Heckscher-Ohlin features of intra-temporal trade into an intertemporal trade approach of current account. To do so, we consider a dynamic general equilibrium model with tradable sectors of different factor intensities, which allows for substitution between intertemporal trade (current account adjustment) and intra-temporal trade (goods trade). An economy's response to a shock generally involves a combination of a change in the composition of goods trade and a change in the current account. Flexible factor markets reduce the need for the current account to adjust. On the other hand, the more rigid the factor markets, the larger the size of current account adjustment relative to the volume of goods trade, and the slow...

Published: Journal of International Economics Available online 7 January 2014

 
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