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Import protection, business cycles, and exchange rates: evidence from the Great Recession

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  • Chad Bown
  • Meredith Crowley

Abstract

This paper uses highly detailed, quarterly data for five major industrialized economies to estimate the impact of> macroeconomic fluctuations on import protection policies over 1988:Q1–2010:Q4. First, estimates on a pre-Great Recession sample of data provide evidence of two key relationships. We confirm that appreciations in bilateral real exchange rates lead to substantial increases in antidumping and related forms of import protection: e.g., a 4 percent appreciation results in 60–90 percent more products being subject to import protection. We also provide evidence of a previously overlooked result that policy-imposing countries historically imposed such bilateral import restrictions on trading partners that were going through periods of weak economic growth.> Second, we use the model to then provide the first estimates that link macroeconomic fluctuations to a change in policy-imposing behavior during the Great Recession so as to explain the realized protectionist response. During the Great Recession, the U.S. and other policy-imposing economies became less responsive to exchange rate appreciations. Furthermore, the U.S. and other economies “switched” from their historical behavior and shifted implementing new import protection away from those trading partners that were contracting and toward those experiencing economic growth. In a final exercise, we document how the model’s estimates imply that a 9–20 percent appreciation of China's real exchange rate vis-à-vis the U.S. dollar during the sample period would allow for China’s exporters to have received the "average" import protection treatment under antidumping that the U.S. imposed against other countries.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-2011-16.

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Date of creation: 2011
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Handle: RePEc:fip:fedhwp:wp-2011-16

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Keywords: Antidumping duties ; Business cycles ; Foreign exchange rates ; Recessions;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The Great Recession and Trade Protectionism: What Went Right?
    by Edward Alden in Renewing America on 2012-05-01 18:47:40
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. J. Bradford Jensen & Dennis P. Quinn & Stephen Weymouth, 2013. "Global Supply Chains, Currency Undervaluation, and Firm Protectionist Demands," NBER Working Papers 19239, National Bureau of Economic Research, Inc.
  2. Chad Bown & Meredith Crowley, 2013. "Emerging economies, trade policy, and macroeconomic shock," Working Paper Series WP-2012-18, Federal Reserve Bank of Chicago.
  3. Bown, Chad P., 2013. "Trade policy flexibilities and Turkey : tariffs, antidumping, safeguards, and WTO dispute settlement," Policy Research Working Paper Series 6322, The World Bank.
  4. Bernard M. Hoekman, 2013. "The World Bank Group Trade Strategy: Fit for Purpose?," RSCAS Working Papers PP2013/04, European University Institute.
  5. Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(03), pages 577-605, July.
  6. Coughlin, Cletus C., 2014. "The great trade collapse and rebound: a state-by-state view," Review, Federal Reserve Bank of St. Louis, vol. 96(1), pages 13-33.
  7. Georgiadis, Georgios & Gräb, Johannes, 2013. "Growth, real exchange rates and trade protectionism since the financial crisis," Working Paper Series 1618, European Central Bank.
  8. Bown, Chad P., 2014. "Trade policy instruments over time," Policy Research Working Paper Series 6757, The World Bank.
  9. Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2013. "The Great Trade Collapse," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 375-400, 05.
  10. 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.
  11. Bown, Chad P. & Karacaovali, Baybars & Tovar, Patricia, 2014. "What do we know about preferential trade agreements and temporary trade barriers ?," Policy Research Working Paper Series 6898, The World Bank.
  12. J. Bradford Jensen & Dennis P. Quinn & Stephen Weymouth, 2014. "The Influences Of Foreign Direct Investments, Intrafirm Trading, And Currency Undervaluation On U.S. Firm Trade Disputes," Working Papers 14-04, Center for Economic Studies, U.S. Census Bureau.

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