Essays in Applied International Economics

Abstract

This dissertation is organized into two essays in international economics and finance. The first is an analysis of the US-Morocco free trade agreement and its impact on Morocco. The study uses a computable general equilibrium CGE model and relaxes assumptions of full employment and perfect competition to analyze the effects of free trade on output and income distribution across sectors of the Morocco economy. It examines the comparative statics of a general equilibrium model of production and trade, and its sensitivity to Cobb-Douglas and constant elasticity of substitution production.

The second essay models the impact of economic growth on the exchange rate under different degrees of capital mobility. It applies an IS-LM-BP model with a modified Dornbusch exchange rate model that relaxes assumptions of perfect capital mobility and full employment. The case examined is South Korea relative to Ireland from 1974 to 1998, the post Bretton Woods era up to Ireland’s adoption of the euro. The main objective is to estimate elasticities of the different determinants of the exchange rate. The application is to test the hypothesis that in a growing economy the degree of capital is mobility determines whether a currency depreciates.