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The Demand for Trade Protection over the Business Cycle

Author

Listed:
  • Stéphane Auray

    (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique, Rennes SB - Rennes School of Business)

  • Michael Devereux

    (Vancouver school of economics, University of British Columbia - UBC - University of British Columbia [Canada], CEPR - Center for Economic Policy Research, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research)

  • Aurélien Eyquem

    (UL2 - Université Lumière - Lyon 2)

Abstract

We build measures of the demand for trade protection, and relate them to permanent productivity and transitory monetary shocks identified from U.S. data. The demand for trade protection is countercyclical conditional on productivity shocks and procyclical conditional on monetary shocks. A two‐country dynamic stochastic general equilibrium (DSGE) model with trade in intermediate and final goods, sticky prices, and incomplete financial markets is proposed, in which tariffs are determined in a repeated noncooperative policy game. The resulting trade policies are consistent with the empirical evidence about the cyclical pattern of trade protection demand.

Suggested Citation

  • Stéphane Auray & Michael Devereux & Aurélien Eyquem, 2023. "The Demand for Trade Protection over the Business Cycle," Post-Print hal-04611842, HAL.
    • Handle: RePEc:hal:journl:hal-04611842
    DOI: 10.1111/jmcb.13039
    as

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    Cited by:

    1. is not listed on IDEAS
    2. Masashige Hamano & Francesco Pappadà & Maria Teresa Punzi, 2023. "Optimal Monetary Policy, Tariff Shocks and Exporter Dynamics," Working Papers 2309, Waseda University, Faculty of Political Science and Economics.

    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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