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Overshooting adjustment to tariff liberalization

  • Christian Keuschnigg

The article analyzes the dynamic effects of tariff liberalization on a small open economy. The primary focus is on nonmonotonic adjustment patterns of net lending such as overshooting or opposite short-and long run effects. When capital accumulation tilts wage income toward the future in the early transition periods, present generations perceive life-cycle type savings disincentives which create a transitory shortfall in savings. In the long run, wage profiles become flat again, and the savings deficiency vanishes. The transitory savings component may give rise to overshooting or opposite short- and long-run adjustment in the total stock of savings and net foreign assets. Copyright Kluwer Academic Publishers 1996

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File URL: http://hdl.handle.net/10.1007/BF01886823
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 7 (1996)
Issue (Month): 3 (July)
Pages: 237-255

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Handle: RePEc:kap:openec:v:7:y:1996:i:3:p:237-255
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  1. Gavin, Michael, 1991. "Income effects of adjustment to a terms of trade disturbance and the demand for adjustment finance," Journal of Development Economics, Elsevier, vol. 37(1-2), pages 127-153, November.
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