Francisco R. Casas

A synthesis of the Heckscher-Ohlin and the neoclassical models of international trade

Abstract In this paper we provide a synthesis between the neoclassical and the Heckscher-Ohlin models of international trade by developing the properties of a two-sector, three-factor model. The neoclassical model, where one or more factors are specific to one or both industries, and the Heckscher-Ohlin model, where two (or all factors) are nonspecific, then can be analyzed as special cases of our model. The theorems by Rybczynski, Stolper and Samuelson, Jones and Chipman, among others, are reexamined in terms of our generalized model.

The short run efficacy of monetary policy under floating exchange rates reconsidered

Abstract This paper disputes the argument that the short-run effectiveness of monetary policy in stabilizing domestic output under floating rates is necessarily reduced if elasticities of demand for imports and exports with respect to the current exchange rate are low and capital flows depend on the exchange rate. It is shown that the relative efficacy of monetary changes is determined by the interest rate elasticity of international interest payments and receipts and the effect of exchange rate variations on the demand for money in addition to the exchange rate elasticities of trade and capital flows.