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Impact of Trade Liberalisation on a Multi-region Economy within an Inter-regional Game Theoretic Framework

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  • Liew, Leong H
  • Siriwardana, Mahinda

Abstract

The aim of this paper is to analyse the general equilibrium effects of tariff changes in a multi-regional model that has inter-government strategic interactions, where central and regional governments react to policies of one another by implementing counter strategies to maximise their own welfare. The motivation for this paper arises from observing inter-provincial and provincial-central government competitive money creation behaviour in China and in the former Soviet Union. By engaging in competitive money creation, governments are able to cushion the impact of tariff changes on national and regional absorption. However, it is also shown that as the marginal rate of substitution of absorption for inflation increases, the impacts of tariff changes with and without competitive money creation tend to converge. Copyright 2002 by Kluwer Academic Publishers

Suggested Citation

  • Liew, Leong H & Siriwardana, Mahinda, 2002. "Impact of Trade Liberalisation on a Multi-region Economy within an Inter-regional Game Theoretic Framework," Economic Change and Restructuring, Springer, vol. 35(1), pages 1-18.
  • Handle: RePEc:kap:ecopln:v:35:y:2002:i:1:p:1-18
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    References listed on IDEAS

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    1. Ng, Francis & Yeats, Alexander, 2003. "Major trade trends in East Asia : what are their implications for regional cooperation and growth," Policy Research Working Paper Series 3084, The World Bank.
    2. Michel Fouquin, 2007. "Economic Integration in East Asia," La Lettre du CEPII, CEPII research center, issue 265.
    3. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters,in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc.
    4. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685.
    5. Schiff, Maurice & Winters, L Alan, 1998. "Dynamics and Politics in Regional Integration Arrangements: An Introduction," World Bank Economic Review, World Bank Group, vol. 12(2), pages 177-195, May.
    6. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2004. "A Consistent, Ad-Valorem Equivalent Measure of Applied Protection Across the World: The MAcMap-HS6 Database," Working Papers 2004-22, CEPII research center.
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