Import protection, business cycles, and exchange rates: Evidence from the Great Recession
AbstractThis paper estimates the impact of macroeconomic fluctuations on import protection policies over 1988:Q1–2010:Q4 for five industrialized economies — the United States, European Union, Australia, Canada and South Korea. We find evidence of a strong countercyclical trade policy response in the pre-Great Recession period of 1988:Q1–2008:Q3 during which increases in domestic unemployment rates, real appreciations in bilateral exchange rates, and declines in the GDP growth rates of bilateral trading partners led to substantial increases in new temporary trade barriers. We then apply this pre-Great Recession empirical model to realized macroeconomic data from 2008:Q4 to 2010:Q4 and find that it predicts a surge of new import protection during the Great Recession — e.g., for the US and EU, the model predicts that new trade barriers would cover an additional 15 percentage points of nonoil imports, well above the baseline level of 2–3% of import coverage immediately preceding the crisis. Finally, we examine why the realized trade policy response differed from model predictions. While exchange rate movements played an important role in limiting new import protection during the Great Recession, we provide evidence of one particularly important change in trade policy responsiveness; i.e., in this period, governments refrained from imposing new temporary trade barriers against foreign trading partners experiencing their own weak or negative economic growth.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 90 (2013)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505552
Antidumping; Safeguards; Temporary trade barriers; US; EU; Macroeconomic fluctuations;
Other versions of this item:
- Chad Bown & Meredith Crowley, 2011. "Import protection, business cycles, and exchange rates: evidence from the Great Recession," Working Paper Series WP-2011-16, Federal Reserve Bank of Chicago.
- Bown, Chad P. & Crowley, Meredith A., 2012. "Import protection, business cycles, and exchange rates : evidence from the great recession," Policy Research Working Paper Series 6038, The World Bank.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The Great Recession and Trade Protectionism: What Went Right?
by Edward Alden in Renewing America on 2012-05-01 18:47:40
- Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2012.
"The Great Trade Collapse,"
NBER Working Papers
18632, National Bureau of Economic Research, Inc.
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"Emerging economies, trade policy, and macroeconomic shock,"
Working Paper Series
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- Chad P. Bown, 2004. "How Different Are Safeguards from Antidumping? Evidence from US Trade Policies Toward Steel," Econometric Society 2004 North American Summer Meetings 434, Econometric Society.
- Bown, Chad P., 2013. "How different are safeguards from antidumping ? evidence from us trade policies toward steel," Policy Research Working Paper Series 6378, The World Bank.
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Cambridge University Press, vol. 12(03), pages 577-605, July.
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