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Commercial and Monetary Policy in a North-South Macroeconomic Model: Tariffs and VERs Compared

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  • Murshed, S Mansoob

Abstract

The paper examines macro-commercial policy imposed by the North on the South in the context of a structuralist North-South model. The North is characterized by Keynesian unemployment with nominal wage rigidity; the South has a flex-price economy with surplus labor. As a departure from most conventional structuralist models, the North has a monetary sector with capital flows to the South. Contrary to the findings of Mundell (1961), tariffs could be expansionary for the North, especially for a Northern block such as North America. These results are reinforced if an expansionary monetary policy is pursued in conjunction with tariffs. When the protectionist instrument is a VER the South's terms of trade could improve. Copyright 1992 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

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  • Murshed, S Mansoob, 1992. "Commercial and Monetary Policy in a North-South Macroeconomic Model: Tariffs and VERs Compared," Australian Economic Papers, Wiley Blackwell, vol. 31(59), pages 414-426, December.
    • Handle: RePEc:bla:ausecp:v:31:y:1992:i:59:p:414-26
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    Cited by:

    1. Murshed, S.M., 2010. "Short and long run macroeconomic effects of trade policy in the presence of debt servicing," ISS Working Papers - General Series 19428, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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