Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Dynamic Model with Import Quota Constraints

Contents:

Author Info

  • Basak, Suleyman
  • Pavlova, Anna

Abstract

The analysis of import quotas is predominantly based on a static model, which is unable to capture the fact that a quota is imposed over a period of time. This article develops a continuous-time model that incorporates a more realistic dynamic quota constraint into the workhorse model and argues many traditional results to no longer be valid. In particular, a country may choose to refrain from trade in a quota-protected commodity even when its world price is below the domestic price and the quota is not fully exhausted. Distinct economic behavior prevails depending on whether the country is importing the protected good, exporting it or refraining from trade in it. The domestic price of the protected good exceeds the world price in import and no-trade regions, even when the quota is underutilized in contrast, the workhorse quota model predicts no economic effects of a quota unless it is binding. Additional factors underlying the quota-protected economy, the quota utilization rate to date and the time remaining till the quota horizon, are identified. Various extensions of the baseline analysis support the robustness of our main conclusions

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/1721.1/5419
Download Restriction: no

Bibliographic Info

Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4230-02.

as in new window
Length:
Date of creation: 09 Jul 2004
Date of revision:
Handle: RePEc:mit:sloanp:5419

Contact details of provider:
Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
Phone: 617-253-2659
Web page: http://mitsloan.mit.edu/
More information through EDIRC

Order Information:
Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

Related research

Keywords: Quota; International Economics and Finance; Asset Pricing; Integral Constraints;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Robert C. Feenstra, 1995. "Estimating the Effects of Trade Policy," NBER Working Papers 5051, National Bureau of Economic Research, Inc.
  2. Eldor, Rafael & Marcus, Alan J., 1988. "Quotas as options: Valuation and equilibrium implications," Journal of International Economics, Elsevier, Elsevier, vol. 24(3-4), pages 255-274, May.
  3. Jérôme B. Detemple & Angel Serrat, 1998. "Dynamic Equilibrium with Liquidity Constraints," CIRANO Working Papers, CIRANO 98s-41, CIRANO.
  4. Anna Pavlova & Roberto Rigobon, 2007. "Asset Prices and Exchange Rates," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 20(4), pages 1139-1180.
  5. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
  6. Suleyman Basak & Benjamin Croitoru, . "Nonlinear Taxation, Tax Arbitrage and Equilibrium Asset Prices," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 07-99, Wharton School Rodney L. White Center for Financial Research.
  7. Krishna, Kala & Tan, Ling Hui, 1996. "The dynamic behavior of quota license prices," Journal of Development Economics, Elsevier, Elsevier, vol. 48(2), pages 301-321, March.
  8. Cox, John C. & Huang, Chi-fu, 1989. "Optimal consumption and portfolio policies when asset prices follow a diffusion process," Journal of Economic Theory, Elsevier, Elsevier, vol. 49(1), pages 33-83, October.
  9. Helpman, Elhanan & Razin, Assaf, 1980. "Efficient Protection under Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 70(4), pages 716-31, September.
  10. Basak, Suleyman, 1995. "A General Equilibrium Model of Portfolio Insurance," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 8(4), pages 1059-90.
  11. Anderson, James E., 1987. "Quotas as options: Optimality and quota license pricing under uncertainty," Journal of International Economics, Elsevier, Elsevier, vol. 23(1-2), pages 21-39, August.
  12. Uppal, Raman, 1993. " A General Equilibrium Model of International Portfolio Choice," Journal of Finance, American Finance Association, American Finance Association, vol. 48(2), pages 529-53, June.
  13. Alan V. Deardorff & Robert M. Stern, 1997. "Measurement of Non-Tariff Barriers," OECD Economics Department Working Papers 179, OECD Publishing.
  14. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, December.
  15. Cadenillas, Abel & Zapatero, Fernando, 1999. "Optimal Central Bank Intervention in the Foreign Exchange Market," Journal of Economic Theory, Elsevier, Elsevier, vol. 87(1), pages 218-242, July.
  16. Bertsimas, Dimitris & Lo, Andrew W., 1998. "Optimal control of execution costs," Journal of Financial Markets, Elsevier, Elsevier, vol. 1(1), pages 1-50, April.
  17. Gary Clyde Hufbauer & Kimberly Ann Elliott, 1994. "Measuring the Costs of Protection in the United States," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 77, July.
  18. Dumas, Bernard, 1992. "Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated World," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 5(2), pages 153-80.
  19. Jérôme Detemple & Angel Serrat, 2003. "Dynamic Equilibrium with Liquidity Constraints," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 16(2), pages 597-629.
  20. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1429-45, November.
  21. Linkins, Linda A. & Arce, Hugh M., 2002. "Estimating Tariff Equivalents of Nontariff Barriers," Working Papers, United States International Trade Commission, Office of Economics 15855, United States International Trade Commission, Office of Economics.
  22. Young, Leslie & Anderson, James E, 1982. "Risk Aversion and Optimal Trade Restrictions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(2), pages 291-305, April.
  23. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, Elsevier, vol. 7(3), pages 265-296, September.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mit:sloanp:5419. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.