| Title |
Self-enforcing trade policy and exchange rate adjustment |
| ID_Doc |
73048 |
| Authors |
Auray, S; Devereux, MB; Eyquem, A |
| Title |
Self-enforcing trade policy and exchange rate adjustment |
| Year |
2022 |
| Published |
|
| DOI |
10.1016/j.jinteco.2021.103552 |
| Abstract |
We explore the cyclical pattern of trade protection in a simple New Keynesian open economy macro model. Tariff rates are determined endogenously in a sustainable equilibrium of a two country trade policy game. The incentive to levy tariffs is greater when the exchange rate is floating, since a fixed exchange rate removes the ability to manipulate the terms of trade. If price are fully flexible, we find that protectionism is basically a-cyclical. By contrast, with pre-set prices, tariffs respond to both monetary and productivity shocks. But the degree of pro-tection may be pro-cyclical or counter-cyclical, depending on the pattern of shocks and param-eter values.(c) 2021 Elsevier B.V. All rights reserved. |
| Author Keywords |
Exchange rates; Protectionism; Business cycle; Exchange rate regime |
| Index Keywords |
Index Keywords |
| Document Type |
Other |
| Open Access |
Open Access |
| Source |
Social Science Citation Index (SSCI) |
| EID |
WOS:000778314200002 |
| WoS Category |
Economics |
| Research Area |
Business & Economics |
| PDF |
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