IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v146y2025ics0264999325000239.html
   My bibliography  Save this article

Anticipated trade policy: New insights from an intertemporal general equilibrium model for Egypt

Author

Listed:
  • Elshennawy, Abeer

Abstract

Utilizing a multisector intertemporal general equilibrium model calibrated to data for Egypt, this study explores the nature of the transitional paths of the economy in response to anticipated and unanticipated trade policy reforms. In general, preannouncement of trade policy is advocated for reducing adjustment costs to trade liberalization. However, this study demonstrates that the preannouncement of a future tariff cut generates welfare losses. Such trade-offs must be considered when designing a trade reform. This study also provides a systematic analysis of the results’ sensitivity to assumptions about the size order of capital stock adjustment costs and the length of the lag between the announcement and implementation of the trade policy reform.

Suggested Citation

  • Elshennawy, Abeer, 2025. "Anticipated trade policy: New insights from an intertemporal general equilibrium model for Egypt," Economic Modelling, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:ecmode:v:146:y:2025:i:c:s0264999325000239
    DOI: 10.1016/j.econmod.2025.107028
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999325000239
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2025.107028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Diao, Xinshen & Somwaru, Agapi, 2000. "An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 557-588, September.
    2. Baldwin, Richard E, 1992. "Measurable Dynamic Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 162-174, February.
    3. Karel Mertens & Morten O. Ravn, 2012. "Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 145-181, May.
    4. Moser, Christoph & Rose, Andrew K., 2014. "Who benefits from regional trade agreements? The view from the stock market," European Economic Review, Elsevier, vol. 68(C), pages 31-47.
    5. Carlo Favero & Francesco Giavazzi, 2012. "Measuring Tax Multipliers: The Narrative Method in Fiscal VARs," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 69-94, May.
    6. Willenbockel, Dirk, 1998. "Growth effects of anticipated trade liberalization and the Baldwin multiplier," Economics Letters, Elsevier, vol. 59(2), pages 231-235, May.
    7. George Alessandria & Carter Mix, 2021. "Trade Policy is Real News: Theory and Evidence," International Finance Discussion Papers 1330, Board of Governors of the Federal Reserve System (U.S.).
    8. Christian Keuschnigg & Wilhelm Kohler, 2002. "Eastern Enlargement of the EU: How Much Is It Worth for Austria?," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 324-342, May.
    9. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson & Ahmed Usman, 2018. "The Economic Effects of Brexit: Evidence from the Stock Market," Fiscal Studies, John Wiley & Sons, vol. 39(4), pages 581-623, December.
    10. Auernheimer, Leonardo & George, Susan Mary, 1997. "Shock versus gradualism in models of rational expectations: the case of trade liberalization," Journal of Development Economics, Elsevier, vol. 54(2), pages 307-322, December.
    11. Sen, Partha & Turnovsky, Stephen J., 1989. "Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect," Journal of International Economics, Elsevier, vol. 26(3-4), pages 227-250, May.
    12. Elshennawy, Abeer & Robinson, Sherman & Willenbockel, Dirk, 2016. "Climate change and economic growth: An intertemporal general equilibrium analysis for Egypt," Economic Modelling, Elsevier, vol. 52(PB), pages 681-689.
    13. Peter Rodriguez, 2003. "Investor Expectations and the North American Free Trade Agreement," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 206-218, February.
    14. Jorge Rojas-Vallejos & Stephen Turnovsky, 2015. "Erratum to: The Consequences of Tariff Reduction for Economic Activity and Inequality," Open Economies Review, Springer, vol. 26(4), pages 601-631, September.
    15. Eddy Bekkers & Hugo Rojas‐Romagosa, 2019. "The welfare effects of free trade agreements in quantitative trade models: A comparison of studies about Transatlantic Trade and Investment Partnership," The World Economy, Wiley Blackwell, vol. 42(1), pages 87-121, January.
    16. repec:bla:reviec:v:10:y:2002:i:2:p:324-42 is not listed on IDEAS
    17. Al-Riffai, Perrihan & Moussa, Suzane & Khalil, Amani & Hussein, Fayza & Serag, Eman & Hassan, Naglaa & Fathy, Ahmed & Samieh, Asmaa & ElSarawy, Mahmoud & Farouk, Embareka & Souliman, Saad & Abdel-Ghaf, 2016. "A disaggregated social accounting matrix: 2010/11 for policy analysis in Egypt," MENA working papers 2, International Food Policy Research Institute (IFPRI).
    18. van der Wielen, Wouter, 2020. "The macroeconomic effects of tax changes: Evidence using real-time data for the European Union," Economic Modelling, Elsevier, vol. 90(C), pages 302-321.
    19. Benjamin Jung, 2023. "The Trade Effects of the EU-South Korea Free Trade Agreement: Heterogeneity Across Time, Country Pairs, and Directions of Trade within Country Pairs," Open Economies Review, Springer, vol. 34(3), pages 617-656, July.
    20. Aggarwal, Raj & Long, Michael & Moore, Scott & Ervin, Danny, 1998. "Industry differences in NAFTA's impact on the valuation of U.S. companies," International Review of Financial Analysis, Elsevier, vol. 7(2), pages 137-152.
    21. Bye, Brita, 2000. "Environmental Tax Reform and Producer Foresight: An Intertemporal Computable General Equilibrium Analysis," Journal of Policy Modeling, Elsevier, vol. 22(6), pages 719-752, November.
    22. Chapda Nana, Guy & Larue, Bruno & Gervais, Jean-Philippe, 2012. "Regional integration and dynamic adjustments: Evidence from gross national product functions for Canada and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 23(2), pages 246-264.
    23. Coulibaly, Souleymane, 2009. "Evaluating the Trade Effect of Developing Regional Trade Agreements: a Semi-parametric Approach," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 709-743.
    24. repec:bla:ecorec:v:74:y:1998:i:225:p:121-38 is not listed on IDEAS
    25. repec:bla:rdevec:v:1:y:1997:i:3:p:275-93 is not listed on IDEAS
    26. Khan, Shafaat Yar & Khederlarian, Armen, 2021. "How does trade respond to anticipated tariff changes? Evidence from NAFTA," Journal of International Economics, Elsevier, vol. 133(C).
    27. McCleery, Robert & DePaolis, Fernando, 2014. "So you want to build a trade model? Available resources and critical choices," Economic Modelling, Elsevier, vol. 40(C), pages 199-207.
    28. Abeer Elshennawy & Dirk Willenbockel, 2014. "Trade Liberalization and the Costs and Benefits of Informality an Intertemporal General Equilibrium Model for Egypt," Working Papers 888, Economic Research Forum, revised Dec 2014.
    29. Chirinko, Robert S., 1987. "Tobin's Q and financial policy," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 69-87, January.
    30. Caroline L. Freund & John McLaren, 1999. "On the dynamics of trade diversion: evidence from four trade blocs," International Finance Discussion Papers 637, Board of Governors of the Federal Reserve System (U.S.).
    31. Florian Mölders & Ulrich Volz, 2011. "Trade creation and the status of FTAs: empirical evidence from East Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 429-456, September.
    32. Hanson, Robert C. & Song, Moon H., 1998. "Shareholder wealth effects of free trade: U.S. and Mexican stock market response to nafta," International Review of Economics & Finance, Elsevier, vol. 7(2), pages 209-224.
    33. Shahzad, Khurram & Rubbaniy, Ghulame & Lensvelt, M.A.P.E. & Bhatti, Tariq, 2019. "UK's stock market reaction to Brexit process: A tale of two halves," Economic Modelling, Elsevier, vol. 80(C), pages 275-283.
    34. Robinson, Sherman & Yunez-Naude, Antonio & Hinojosa-Ojeda, Raul & Lewis, Jeffrey D. & Devarajan, Shantayanan, 1999. "From stylized to applied models:: Building multisector CGE models for policy analysis," The North American Journal of Economics and Finance, Elsevier, vol. 10(1), pages 5-38.
    35. Poterba, James M. & Summers, Lawrence H., 1983. "Dividend taxes, corporate investment, and `Q'," Journal of Public Economics, Elsevier, vol. 22(2), pages 135-167, November.
    36. Artuç, Erhan & Chaudhuri, Shubham & McLaren, John, 2008. "Delay and dynamics in labor market adjustment: Simulation results," Journal of International Economics, Elsevier, vol. 75(1), pages 1-13, May.
    37. Stefan F. Schubert & Stephen J. Turnovsky, 2002. "The Dynamics of Temporary Policies in a Small Open Economy," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 604-622, November.
    38. Thompson, Aileen J., 1994. "Trade liberalization, comparative advantage, and scale economies stock market evidence from Canada," Journal of International Economics, Elsevier, vol. 37(1-2), pages 1-27, August.
    39. Keuschnigg, Christian & Kohler, Wilhelm, 1994. "Modeling Intertemporal General Equilibrium: An Application to Austrian Commercial Policy," Empirical Economics, Springer, vol. 19(1), pages 131-164.
    40. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-831, November.
    41. Keith E. Maskus & Denise Eby Konan, 1997. "Trade Liberalization in Egypt," Review of Development Economics, Wiley Blackwell, vol. 1(3), pages 275-293, October.
    42. Csilla Lakatos & Lars Nilsson, 2017. "The EU-Korea FTA: anticipation, trade policy uncertainty and impact," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 179-198, February.
    43. Turnovsky, Stephen J. & Rojas-Vallejos, Jorge, 2018. "The distributional consequences of trade liberalization: Consumption tariff versus investment tariff reduction," Journal of Development Economics, Elsevier, vol. 134(C), pages 392-415.
    44. Rasyad A. Parinduri & Shandre M. Thangavelu, 2013. "Trade liberalization, free trade agreements, and the value of firms: Stock market evidence from Singapore," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(6), pages 924-941, September.
    45. Gavin, Michael, 1991. "Tariffs and the current account : On the macroeconomics of commercial policy," Journal of Economic Dynamics and Control, Elsevier, vol. 15(1), pages 27-52.
    46. Konno, Toru & Fukushige, Mototsugu, 2003. "Did NAFTA cause the structural changes in bilateral import functions between the US and Mexico?," Journal of Policy Modeling, Elsevier, vol. 25(1), pages 53-59, January.
    47. Devarajan, Shantayanan & Go, Delfin S., 1998. "The Simplest Dynamic General-Equilibrium Model of an Open Economy," Journal of Policy Modeling, Elsevier, vol. 20(6), pages 677-714, December.
    48. Ariel Burstein & Marc J. Melitz, 2011. "Trade Liberalization and Firm Dynamics," NBER Working Papers 16960, National Bureau of Economic Research, Inc.
    49. Michael Malakellis, 1998. "Should Tariff Reductions be Announced? An Intertemporal Computable General Equilibrium Analysis," The Economic Record, The Economic Society of Australia, vol. 74(225), pages 121-138, June.
    50. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
    51. Fereira, Semertesides Bitica & Cateia, Júlio Vicente, 2023. "Trade reform, infrastructure investment, and structural transformation in Africa: Evidence from Guinea-Bissau," Emerging Markets Review, Elsevier, vol. 55(C).
    52. Latorre, María C. & Olekseyuk, Zoryana & Yonezawa, Hidemichi & Robinson, Sherman, 2020. "Making sense of Brexit losses: An in-depth review of macroeconomic studies," Economic Modelling, Elsevier, vol. 89(C), pages 72-87.
    53. Go, Delfin S., 1994. "External shocks, adjustment policies and investment in a developing economy: Illustrations from a forward-looking CGE model of the Philippines," Journal of Development Economics, Elsevier, vol. 44(2), pages 229-261, August.
    54. Warwick McKibbin & Jong-Wha Lee & Inkyo Cheong, 2004. "A dynamic analysis of the Korea-Japan free trade area: simulations with the G-cubed Asia-Pacific model," International Economic Journal, Taylor & Francis Journals, vol. 18(1), pages 3-32.
    55. Edwards, Sebastian & Ostry, Jonathan D., 1990. "Anticipated protectionist policies, real exchange rates, and the current account: the case of rigid wages," Journal of International Money and Finance, Elsevier, vol. 9(2), pages 206-219, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elshennawy, Abeer & Robinson, Sherman & Willenbockel, Dirk, 2016. "Climate change and economic growth: An intertemporal general equilibrium analysis for Egypt," Economic Modelling, Elsevier, vol. 52(PB), pages 681-689.
    2. Andreas Dür & Lisa Lechner, 2023. "Winners and Losers From Trade Agreements: Stock Market Reactions to TPP and TTIP," Politics and Governance, Cogitatio Press, vol. 11(4), pages 200-211.
    3. Peter H Egger & Jiaqing Zhu, 2020. "The US–Chinese trade war: an event study of stock-market responses," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(103), pages 519-559.
    4. Xiaosong Wang & Huan Wu & Le Li, 2022. "Trade policy and return on capital: An empirical analysis based on China's antidumping," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 865-892, January.
    5. Andreas Dür & Lisa Lechner, 2023. "Winners and Losers From Trade Agreements: Stock Market Reactions to TPP and TTIP," Politics and Governance, Cogitatio Press, vol. 11(4), pages 200-211.
    6. Olivier Cardi & Romain Restout, 2014. "Unanticipated vs. Anticipated Tax Reforms in a Two-Sector Open Economy," Open Economies Review, Springer, vol. 25(2), pages 373-406, April.
    7. repec:lic:licosd:8900 is not listed on IDEAS
    8. Richard W. Kopcke, 1995. "Tobin's Q, economic rents, and the optimal stock of capital," Working Papers 95-4, Federal Reserve Bank of Boston.
    9. Gu, Xin & Zhang, Weiqiang & Cheng, Sang, 2021. "How do investors in Chinese stock market react to external uncertainty? An event study to the Sino-US disputes," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    10. Lecca, Patrizio & McGregor, Peter G. & Swales, J. Kim, 2013. "Forward-looking and myopic regional Computable General Equilibrium models: How significant is the distinction?," Economic Modelling, Elsevier, vol. 31(C), pages 160-176.
    11. Michael P. O'Malley, 1996. "Tax exhaustion, firm investment, and leasing; a test of the Q model of investment," Finance and Economics Discussion Series 96-31, Board of Governors of the Federal Reserve System (U.S.).
    12. Moser, Christoph & Rose, Andrew K., 2014. "Who benefits from regional trade agreements? The view from the stock market," European Economic Review, Elsevier, vol. 68(C), pages 31-47.
    13. Bruce F. Parsell & Alan A. Powell & Peter J. Wilcoxen, 1989. "The Reconciliation of Computable General Equilibrium and Macroeconomic Modelling: Grounds for Hope?," Centre of Policy Studies/IMPACT Centre Working Papers ip-44, Victoria University, Centre of Policy Studies/IMPACT Centre.
    14. Martínez-Zarzoso, Inmaculada & Voicu, Anca M. & Vidovic, Martina, 2020. "Production networks in Europe: A natural experiment of the EU enlargement to the east," University of Göttingen Working Papers in Economics 390, University of Goettingen, Department of Economics.
    15. Keuschnigg, Christian & Kohler, Wilhelm, 1996. "Commercial policy and dynamic adjustment under monopolistic competition," Journal of International Economics, Elsevier, vol. 40(3-4), pages 373-409, May.
    16. Richard W. Kopcke, 1992. "Tobin's Q, economic rents, and the optimal stock of capital," Working Papers 92-3, Federal Reserve Bank of Boston.
    17. Manh Toan Nguyen & Tung Lam Dang & Thi Hong Hanh Huynh, 2020. "Trade Liberalization and Income Distribution in Vietnam: Dynamic CGE Approach," Asian Economic Journal, East Asian Economic Association, vol. 34(4), pages 404-429, December.
    18. Cuthbertson, K. & Gasparro, D., 1995. "Fixed investment decisions in UK manufacturing: The importance of Tobin's Q, output and debt," European Economic Review, Elsevier, vol. 39(5), pages 919-941, May.
    19. Huy Pham & Priyantha Mudalige & Hanh Le & Mai Bui & Van Nguyen & Vikash Ramiah & Tuan Chu & Tuan Hung Vu, 2024. "The effects of free trade agreements on the stock market: Evidence from Vietnam," PLOS ONE, Public Library of Science, vol. 19(2), pages 1-20, February.
    20. Christian Keuschnigg, 1996. "Overshooting adjustment to tariff liberalization," Open Economies Review, Springer, vol. 7(3), pages 237-255, July.
    21. Bergman, Lars, 2005. "CGE Modeling of Environmental Policy and Resource Management," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 24, pages 1273-1306, Elsevier.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:146:y:2025:i:c:s0264999325000239. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.