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Effects of trade liberalization on domestic prices: Some evidence from Tunisian manufacturing

  • Ali Saggay

    ()

  • Almas Heshmati

    ()

  • Mohamed Dhif

    ()

This paper presents estimates of the competitive effects of trade liberalization on domestic pricing behaviour of Tunisian manufacturing industries. The theoretical framework is based on a dynamic flexible adjustment model of price determination in a small open economy. It investigates the process of adjustment in price level toward a desired level. The adjustment process is both industrial and time-specific. The empirical results show that, in the long run, domestic price responds greatly to import penetration, followed by demand pressure. There was a negative effect from import competition on domestic price. Trade policy is a viable policy option to promote competitiveness.

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File URL: http://hdl.handle.net/10.1007/s12232-007-0008-3
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Article provided by Springer in its journal International Review of Economics.

Volume (Year): 54 (2007)
Issue (Month): 1 (March)
Pages: 148-175

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Handle: RePEc:spr:inrvec:v:54:y:2007:i:1:p:148-175
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