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Globalisation as a ‘good times’ phenomenon: a search-based explanation

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Globalisation is associated with long periods of sustained economic growth and credit expansion, whereas major recessions tend to lead to falling trade and protectionism. The sensitivity of trade to global economic conditions is not simply driven by policy: rather, in a model of costly search, firms who are engaged in a searching process are very sensitive to changing economic circumstances. In turn, this causes protectionism to be partly endogenous, since optimal noncooperative tariffs can be high during periods when the sensitive, searching firms have exited the market.

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File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/Goodtimes.pdf
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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2009_07.

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Date of creation: Jun 2009
Date of revision: Jun 2009
Handle: RePEc:lbo:lbowps:2009_07

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Keywords: Globalisation; trade; search;

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