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Real Exchange Rates and Trade Protectionism

Listed author(s):
  • Oatley Thomas

    (University of North Carolina)

Registered author(s):

    Real exchange rate movements are robustly related to the rise and fall of trade protectionism. I demonstrate this by presenting a theoretical model that incorporates the real exchange rate into a standard factor proportions model of trade policy preferences. The model demonstrates why some firms trade policy preferences, and thus total demands for protectionism, change in response to real exchange rate movements. I evaluate the model with data on antidumping investigations in six industrialized countries between the late 1970s and 2004. The exercise suggests that the real exchange rate hypothesis offers a more compelling explanation for protectionist waves than the business cycle hypothesis.

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    File URL: https://www.degruyter.com/view/j/bap.2010.12.2/bap.2010.12.2.1309/bap.2010.12.2.1309.xml?format=INT
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    Article provided by De Gruyter in its journal Business and Politics.

    Volume (Year): 12 (2010)
    Issue (Month): 2 (August)
    Pages: 1-19

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    Handle: RePEc:bpj:buspol:v:12:y:2010:i:2:n:1
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    1. Rudiger Dornbusch, 1985. "Exchange Rates and Prices," NBER Working Papers 1769, National Bureau of Economic Research, Inc.
    2. Douglas A. Irwin, 2005. "The Rise of U.S. Antidumping Activity in Historical Perspective," IMF Working Papers 05/31, .
    3. Frieden, Jeffry A., 1997. "Monetary Populism in Nineteenth-Century America: An Open Economy Interpretation," The Journal of Economic History, Cambridge University Press, vol. 57(02), pages 367-395, June.
    4. Knetter, Michael M. & Prusa, Thomas J., 2003. "Macroeconomic factors and antidumping filings: evidence from four countries," Journal of International Economics, Elsevier, vol. 61(1), pages 1-17, October.
    5. Michael P. Leidy, 1997. "Macroeconomic Conditions and Pressures for Protection under Antidumping and Countervailing Duty Laws: Empirical Evidence from the United States," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 132-144, March.
    6. Coughlin, Cletus C & Terza, Joseph V & Khalifah, Noor Aini, 1989. "The Determinants of Escape Clause Petitions," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 341-347, May.
    7. Bohara, Alok K & Kaempfer, William H, 1991. "A Test of Tariff Endogeneity in the United States," American Economic Review, American Economic Association, vol. 81(4), pages 952-960, September.
    8. Eichengreen, Barry & Irwin, Douglas A., 2010. "The Slide to Protectionism in the Great Depression: Who Succumbed and Why?," The Journal of Economic History, Cambridge University Press, vol. 70(04), pages 871-897, December.
    9. Evenett, Simon J, 2009. "What Can Be Learned from Crisis-Era Protectionism? An Initial Assessment," CEPR Discussion Papers 7494, C.E.P.R. Discussion Papers.
    10. Gunnar Niels & Joseph Francois, 2006. "Business Cycles, the Exchange Rate, and Demand for Antidumping Protection in Mexico," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 388-399, 08.
    11. Takacs, Wendy E, 1981. "Pressures for Protectionism: An Empirical Analysis," Economic Inquiry, Western Economic Association International, vol. 19(4), pages 687-693, October.
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