Trade Liberalization in Disinflation
There exists near-consensus among professional economists on the desirability of achieving macroeconomic stabilization prior to the removal of microeconomic distortions. Yet this advice was completely disregarded in some of the most important cases of reform during the last decade -- Bolivia and Mexico since 1985, Poland since 1990, Argentina since 1991, for example. In these and many other cases, radical trade liberalization measures were put in place, or existing programmes speeded up, in conjunction with macroeconomic stabilization packages. In this paper I revisit this issue by focusing on recent liberalizations in Latin America. I argue that the theoretical case for the existence of a policy dilemma in exchange rate management when trade liberalization is implemented simultaneously with stabilization policies is weaker than is usually presupposed. A commitment to a pegged exchange rate can, if credible, actually solve rather than intensify the potential conflict between trade liberalization and exchange rate stability. The credibility of disinflation may be endangered by early liberalization, however.
|Date of creation:||Aug 1993|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pritchett, Lant & Sethi, Geeta, 1993.
"Tariff rates, tariff revenue, and tariff reform : some new facts,"
Policy Research Working Paper Series
1143, The World Bank.
- Pritchett, Lant & Sethi, Geeta, 1994. "Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts," World Bank Economic Review, World Bank Group, vol. 8(1), pages 1-16, January.
- Rodrik, Dani, 1992.
"Foreign Trade in Eastern Europe's Transition: Early Results,"
CEPR Discussion Papers
676, C.E.P.R. Discussion Papers.
- Dani Rodrik, 1994. "Foreign Trade in Eastern Europe's Transition: Early Results," NBER Chapters, in: The Transition in Eastern Europe, Volume 2: Restructuring, pages 319-356 National Bureau of Economic Research, Inc.
- Dani Rodrik, 1992. "Foreign Trade in Eastern Europe's Transition: Early Results," NBER Working Papers 4064, National Bureau of Economic Research, Inc.
- Bruno, M., 1991. "High Inflation and the Nominal Anchors of an Open Economy," Princeton Studies in International Economics 183, International Economics Section, Departement of Economics Princeton University,.
- R. Dornbusch, 1984.
"External Debt, Budget Deficits and Disequilibrium Exchange Rates,"
347, Massachusetts Institute of Technology (MIT), Department of Economics.
- Rudiger Dornbusch, 1984. "External Debt, Budget Deficits and Disequilibrium Exchange Rates," NBER Working Papers 1336, National Bureau of Economic Research, Inc.
- de Melo, Jaime & Dhar, Sumana, 1992. "Lessons of trade liberalization in Latin America for economies in transition," Policy Research Working Paper Series 1040, The World Bank.
- Pfeffermann, G.P. & Madarassy, A., 1992. "Trends in Private Investment in Developing Countries," Papers 16, World Bank - International Finance Corporation.
- Mussa, Michael, 1987. "Macroeconomic Policy and Trade Liberalization: Some Guidelines," World Bank Research Observer, World Bank Group, vol. 2(1), pages 61-77, January.
- Pfeffermann, G.P. & Madarassy, A., 1992. "Trend in Private Investment in Developing Countries," Papers 14, World Bank - International Finance Corporation.
- Dani Rodrik, 1992. "The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will it Last?," NBER Working Papers 3947, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:832. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.