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Stochastic trade policy with asset markets : The role of tariff structure

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  • Barari, Mahua
  • Lapan, Harvey E.

Abstract

This paper uses a Stockman-Dellas type two-country, two-good, stochastic general equilibrium model to consider the effects of commercial policy when asset markets are complete. We show that: (i) import and export tariffs do not have symmetric effects because interstate relative prices depend on the entire tariff structure; (ii) when commercial policy is random and exogenously determined, the ex post comparison of utility across states depends upon whether import or export tariffs are used; and (iii) when endowments are random, implying the optimal tariff varies across states, the introduction of asset markets may be welfare-reducing when only import tariffs are used.
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Suggested Citation

  • Barari, Mahua & Lapan, Harvey E., 1993. "Stochastic trade policy with asset markets : The role of tariff structure," Journal of International Economics, Elsevier, vol. 35(3-4), pages 317-333, November.
  • Handle: RePEc:eee:inecon:v:35:y:1993:i:3-4:p:317-333
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    Cited by:

    1. Francois, Joseph F. & Martin, Will, 2004. "Commercial policy variability, bindings, and market access," European Economic Review, Elsevier, vol. 48(3), pages 665-679, June.
    2. Michael J. Dueker, 1995. "Tariffs and asset market structure: some basic comparative dynamics," Working Papers 1995-009, Federal Reserve Bank of St. Louis.
    3. repec:kap:iaecre:v:3:y:1997:i:1:p:18-36 is not listed on IDEAS
    4. Mahua Barari, 1997. "Trade policy with asset markets: The role of financial structure for time consistency," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 3(1), pages 18-36, February.
    5. Michael R. Pakko, 1996. "Tariff risk and international borrowing with incomplete asset markets," Working Papers 1996-011, Federal Reserve Bank of St. Louis.

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