Trade, FDI, and Global Imbalances

34 Pages Posted: 19 Mar 2020

See all articles by Wei Li

Wei Li

Shanghai University of Finance and Economics

Guangyu Nie

Shanghai University of Finance and Economics

zi wang

Shanghai University of Finance and Economics

Date Written: February 24, 2020

Abstract

We propose a multi-country dynamic general equilibrium model to quantify the implications of trade and FDI liberalizations for the surge of global trade and current account (CA) imbalances. We calibrate our model to replicate the evolution of bilateral trade and FDI flows across 5 major economies as well as their CA balances over 1996-2014. Our counterfactual experiments suggest that the decline in trade and FDI costs accounts for about half of the increase in global trade imbalances and a quarter of the increase in CA imbalances over this period. Moreover, we find that the openness of the Chinese economy after 2001 has little impacts on global imbalances, whereas the unbundling of the U.S. outward FDI is a major driver of global imbalances.

Keywords: Trade, FDI, Trade Imbalance, Current Account Imbalance

JEL Classification: F15, F21, F32, F41, F43

Suggested Citation

Li, Wei and Nie, Guangyu and wang, zi, Trade, FDI, and Global Imbalances (February 24, 2020). Available at SSRN: https://ssrn.com/abstract=3543458 or http://dx.doi.org/10.2139/ssrn.3543458

Wei Li

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Guangyu Nie (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, Shanghai 200433
China

HOME PAGE: http://www.nieguangyu.wixsite.com/econ

Zi Wang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

HOME PAGE: http://https://sites.google.com/site/icebergzw/

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