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LDCs, International Capital Mobility and the Shadow Price of Foreign Exchange under Tariffs and Quantitative Restrictions

  • David Franck

    ()

    (College of Business and Public Affairs, The University of Tennessee at Martin)

  • Nadeem Naqvi

    (Western Carolina University)

For a very general, small open less-developed country with a convex production set, the shadow price of foreign exchange is lower with tariffs on one subset of imports and VERs on another than with tariffs and quotas. This is true with and without international capital mobility. Furthermore, the introduction of international capital mobility reduces the shadow price of foreign exchange in the presence of tariffs and quotas and raises the shadow price of foreign exchange in the presence of tariffs and VERs when tariff- and quantity-constrained goods are both capital intensive or both not capital intensive and are substitutes in import demand.

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Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 25 (2000)
Issue (Month): 2 (December)
Pages: 43-54

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Handle: RePEc:jed:journl:v:25:y:2000:i:2:p:43-54
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  1. Neary, J Peter, 1989. "Trade Liberalization and Shadow Prices in the Presence of Tariffs and Quotas," CEPR Discussion Papers 345, C.E.P.R. Discussion Papers.
  2. Peter Neary, 1988. "Tariffs, Quotas, and Voluntary Export Restraints with and without Internationally Mobile Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 714-35, November.
  3. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
  4. Chao, Chi-Chur & Yu, Eden S. H., 1995. "The shadow price of foreign exchange in a dual economy," Journal of Development Economics, Elsevier, vol. 46(1), pages 195-202, February.
  5. Neary, J Peter, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 551-70, August.
  6. Richard Dusansky & David Franck & Nadeem Naqvi, 2000. "The true shadow price of foreign exchange," Journal of Economics and Finance, Springer, vol. 24(2), pages 206-214, June.
  7. Vandana Chandra & Nadeem Naqvi, 1997. "Protection and the Shadow Price of Foreign Exchange with Increasing Returns and International Capital Mobility," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 959-67, November.
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