The Trade Deficit Illusion: The Monstrous Trade Model

12 Pages Posted: 13 Jun 2009 Last revised: 22 Aug 2015

See all articles by Hak Choi

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

Date Written: June 12, 2009

Abstract

Trade is a reciprocal relation, and must always be balanced. This paper shows that the traditional partial model of international trade is a monster model, combining the demand and the supply of two different markets into one graph. Such theory thus misleads some people to use trade deficit to accuse each other or to start trade wars. Any effort to reduce the so-called trade deficit must be in vain, for the latter does not exist. More than that, it must also hurt the host country.

Keywords: Trade deficit, Walras’ law, Gain from trade

JEL Classification: F11, F13

Suggested Citation

Choi, Hak, The Trade Deficit Illusion: The Monstrous Trade Model (June 12, 2009). Available at SSRN: https://ssrn.com/abstract=1418505 or http://dx.doi.org/10.2139/ssrn.1418505

Hak Choi (Contact Author)

Chienkuo Technology University - Department of International Business ( email )

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