Stochastic Trade Policy with Asset Markets: The Role of Tariff Structure
AbstractThis 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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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10042.
Date of creation: 01 Nov 1993
Date of revision:
Publication status: Published in Journal of International Economics, November 1993, vol. 35 no. 03/04/09, pp. 317-333
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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Other versions of this item:
- Barari, Mahua & Lapan, Harvey E., 1993. "Stochastic trade policy with asset markets : The role of tariff structure," Journal of International Economics, Elsevier, vol. 35(3-4), pages 317-333, November.
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- Francois, Joseph F. & Martin, Will, 2004.
"Commercial policy variability, bindings, and market access,"
European Economic Review,
Elsevier, vol. 48(3), pages 665-679, June.
- Joseph Francois & Will Martin, 2002. "Commercial Policy Variability, Bindings, and Market Access," International Trade 0210002, EconWPA.
- Francois, Joseph & Martin, Will, 2002. "Commercial Policy Variability, Bindings and Market Access," CEPR Discussion Papers 3294, C.E.P.R. Discussion Papers.
- Michael Dueker, 1995. "Tariffs and asset market structure: some basic comparative dynamics," Working Papers 1995-009, Federal Reserve Bank of St. Louis.
- Joseph F. Francois & Will Martin, 1998. "Commercial Policy Uncertainty, the Expected Cost of Protection, and Market Access," Tinbergen Institute Discussion Papers 98-059/2, Tinbergen Institute.
- Michael R. Pakko, 1996. "Tariff risk and international borrowing with incomplete asset markets," Working Papers 1996-011, Federal Reserve Bank of St. Louis.
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