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Piecemeal Oligopoly, Exchange Rate Uncertainty, and Trade Policy

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  • Fernando Mesa

Abstract

RESUMEN: Este artículo analiza el efecto sistemático de la volatilidad de la tasa de cambio, cuando un gobierno local debe evaluar políticas comerciales estratégicas lineales y cuadráticas. Este ejercicio se realiza para modelos de mercado Cournot y Bertran. El modelo prueba que tanto el esquema lineal como el cuadrático tienen el mismo efecto sobre el bienestar social de los paises, y que la volatilidad de la tasa de cambio doméstica lleva a los gobiernos a reducir los subsidios a las exportaciones o bajan los impuestos a las exportaciones, de acuerdo a la variable estratégica elegida por las firmas. La tasa de cambio extrangera tiene diferentes efectos dependiendo de si las firmas producen bajos rendimientos a escalas constantes o decrecientes. ABSTRACT: This paper examines the systematic effect of the exchange rate volatility, when a local government has to evaluate linear and quadratic strategic trade policies. The exercise is realized for both Cournot and Bertrand markets fashions. The model proves that the linear or quadratic scheme have the same effect on the countries’ social welfare, and that the volatility of the domestic exchange rate leads governments to reduce export subsidies or to cut export taxes, according to the strategic variable chosen by firms. The foreign exchange rate volatility has different effects if firms produce under constant return or decreasing return of scale.

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Bibliographic Info

Article provided by UNIVERSIDAD DEL ROSARIO in its journal REVISTA DE ECONOMÍA DEL ROSARIO.

Volume (Year): (2009)
Issue (Month): ()
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Handle: RePEc:col:000151:008799

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  1. Laussel, D., 1990. "Strategic Commercial Policy Revisited: A Supply Function Equilibrium Model," G.R.E.Q.A.M. 90a05, Universite Aix-Marseille III.
  2. Kala Krishna & Kathleen Hogan & Phillip Swagel, 1994. "The Nonoptimality of Optimal Trade Policies: The U.S. Automobile Industry Revisited, 1979-1985," NBER Chapters, in: Empirical Studies of Strategic Trade Policy, pages 11-40 National Bureau of Economic Research, Inc.
  3. Viaene, J-M. & De Vries, C.G., 1989. "International Trade And Exchange Rate Volatility," Papers 8905, Erasmus University of Rotterdam - Institute for Economic Research.
  4. Caglayan, Mustafa, 2000. "Uncertainty Resolution and Strategic Trade Policy in Oligopolistic Industries," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 311-18, May.
  5. Cooper, Russell & Riezman, Raymond, 1989. "Uncertainty and the Choice of Trade Policy in Oligopolistic Industrie s," Review of Economic Studies, Wiley Blackwell, vol. 56(1), pages 129-40, January.
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