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Would protectionism defuse global imbalances and spur economic activity? A scenario analysis

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  • Faruqee, Hamid
  • Laxton, Douglas
  • Muir, Dirk
  • Pesenti, Paolo

Abstract

In the evolving debate and analysis of global imbalances, a commonly overlooked issue pertains to rising protectionism. This paper attempts to fill that gap, examining the macroeconomic implications of trade policy changes through the lens of a dynamic general equilibrium model of the world economy encompassing four regional blocs. Simulation exercises are carried out to consider the imposition of uniform and discriminatory tariffs on trading partners as well as the case of tariff retaliation. We also discuss a scenario in which a 'globalization backlash' lowers the degree of competition in import-competing sectors, and compare the implications of higher markups in the product and labor markets.
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  • Faruqee, Hamid & Laxton, Douglas & Muir, Dirk & Pesenti, Paolo, 2008. "Would protectionism defuse global imbalances and spur economic activity? A scenario analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2651-2689, August.
  • Handle: RePEc:eee:dyncon:v:32:y:2008:i:8:p:2651-2689
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    Cited by:

    1. Bartocci, Anna & Pisani, Massimiliano, 2013. "“Green” fuel tax on private transportation services and subsidies to electric energy. A model-based assessment for the main European countries," Energy Economics, Elsevier, vol. 40(S1), pages 32-57.
    2. Rene Lalonde & Dirk Muir, 2007. "The Bank of Canada's Version of the Global Economy Model (BoC-GEM)," Technical Reports 98, Bank of Canada.
    3. Sandra Gomes & Pascal Jacquinot & Matthias Mohr & Massimiliano Pisani, 2013. "Structural Reforms and Macroeconomic Performance in the Euro Area Countries: A Model-Based Assessment," International Finance, Wiley Blackwell, vol. 16(1), pages 23-44, February.
    4. Selim Elekdag & René Lalonde & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2008. "Oil Price Movements and the Global Economy: A Model-Based Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 55(2), pages 297-311, June.
    5. Larch, Mario & Lechthaler, Wolfgang, 2011. "Is there a short-run case for protectionism? Trade policy and the business cycle," Kiel Working Papers 1717, Kiel Institute for the World Economy (IfW).
    6. Arslan, Yavuz & Kılınç, Mustafa & Turhan, M. İbrahim, 2015. "Global imbalances, current account rebalancing and exchange rate adjustments," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 324-341.
    7. Philip R. Lane & Gian Maria Milesi-Ferretti, 2007. "Europe and global imbalances," Economic Policy, CEPR;CES;MSH, vol. 22, pages 519-573, July.
    8. repec:wsi:jicepx:v:01:y:2010:i:02:n:s1793993310000111 is not listed on IDEAS
    9. Rob Gregory & Christian Henn & Brad Mcdonald & Mika Saito, 2010. "Trade And The Crisis: Protect Or Recover," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 165-181.
    10. Furlanetto, Francesco, 2011. "Fiscal stimulus and the role of wage rigidity," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 512-527, April.
    11. Francesco FURLANETTO, 2007. "Fiscal Shocks and the Consumption Response when Wages are Sticky," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 07.11, Université de Lausanne, Faculté des HEC, DEEP.
    12. René Lalonde & Philipp Maier & Dirk Muir, 2009. "Emerging Asia's Impact on Food and Oil Prices: A Model-Based Analysis," Discussion Papers 09-3, Bank of Canada.
    13. Dennis P Botman & David Rose & Douglas Laxton & Philippe D Karam, 2007. "DSGE Modeling at the Fund; Applications and Further Developments," IMF Working Papers 07/200, International Monetary Fund.

    More about this item

    JEL classification:

    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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