This paper uses a Stockman-Dellas type two-country, two-good, stochastic general equilibrium model to consider the effects of commercial policy when asset markets are complete. We show that: (i) import and export tariffs do not have symmetric effects because interstate relative prices depend on the entire tariff structure; (ii) when commercial policy is random and exogenously determined, the ex post comparison of utility across states depends upon whether import or export tariffs are used; and (iii) when endowments are random, implying the optimal tariff varies across states, the introduction of asset markets may be welfare-reducing when only import tariffs are used.
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
10042.
Length: Date of creation: 20 Sep 2002 Date of revision: Publication status: Published in Journal of International Economics, November 1993, Vol. 35, No. 3-4, pp. 317-333. Handle: RePEc:isu:genres:10042
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Find related papers by JEL classification: F1 - International Economics - - Trade F3 - International Economics - - International Finance
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