Abstract

This dissertation explores key issues in international and development economics, focusing on trade liberalization, foreign exchange intervention, and the interaction between fiscal and monetary policies. The first chapter investigates the optimal timing of trade liberalization for low-income countries. It develops a three-sector model incorporating productivity spillovers and organizational capital accumulation to assess how early or delayed trade liberalization affects long-term economic development. The results show that premature liberalization can inhibit manufacturing growth, whereas strategic delay can enhance overall welfare. The second chapter examines the redistributive effects of foreign exchange intervention (FXI) in a two-country model where all international trade is conducted in a dominant foreign currency. It finds that while FXI increases export quantity, the primary burden falls on the domestic sector of the intervening country rather than on foreign exporters. This challenges the conventional belief that FXI benefits domestic producers at the expense of foreign competitors. The calibration results suggest that an increase in foreign reserves leads to a measurable loss of wealth for the domestic sector. The third chapter investigates how different fiscal policies affect monetary policy efficiency, particularly in economies with state-owned businesses (SOBs). Using a cash-in-advance framework, the study compares the effectiveness of lump-sum taxes, labor taxes, output taxes, and SOB profits as sources of government revenue. The findings indicate that while the Friedman Rule suggests deflationary policies are optimal under lump-sum taxation, alternative tax schemes create distortions, making deflation suboptimal. Among non-lump-sum revenue sources, output taxation is the least distortionary in a positive inflation regime. These insights underscore the importance of fiscal constraints in the formation in optimal monetary policy. Together, these chapters contribute to our understanding of trade policy, foreign currency intervention, and monetary-fiscal interactions, providing policy-relevant insights for developing and emerging economies.

Committee Chair

Ping Wang

Committee Members

Francisco Buera; Paulina Restrepo-Echavarria; Rodolfo Manuelli; Yili Chien

Degree

Doctor of Philosophy (PhD)

Author's Department

Economics

Author's School

Graduate School of Arts and Sciences

Document Type

Dissertation

Date of Award

4-17-2025

Language

English (en)

Author's ORCID

https://orcid.org/0000-0002-0462-0165

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Available for download on Tuesday, May 07, 2030

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Economics Commons

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