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Stochastic Trade Policy with Asset Markets: The Role of Tariff Structure

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  • Barari, Mahua
  • Lapan, Harvey E.

Abstract

This paper uses a Stockman-Dellas type two-country, two-good, stochastic general equilibrium model to consider the effects of commercial policy when asset markets are complete. We show that: (i) import and export tariffs do not have symmetric effects because interstate relative prices depend on the entire tariff structure; (ii) when commercial policy is random and exogenously determined, the ex post comparison of utility across states depends upon whether import or export tariffs are used; and (iii) when endowments are random, implying the optimal tariff varies across states, the introduction of asset markets may be welfare-reducing when only import tariffs are used.

Suggested Citation

  • Barari, Mahua & Lapan, Harvey E., 1993. "Stochastic Trade Policy with Asset Markets: The Role of Tariff Structure," Staff General Research Papers Archive 10042, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:10042
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    References listed on IDEAS

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    1. Samuelson, Paul A & Swamy, S, 1974. "Invariant Economic Index Numbers and Canonical Duality: Survey and Synthesis," American Economic Review, American Economic Association, pages 566-593.
    2. Herings P. Jean-Jacques & Peeters R., 1999. "A Differentiable Homotopy to Compute Nash Equilibria of n-Person Games," Research Memorandum 038, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    3. David A. Hennessy & Harvey E. Lapan, 2003. "Technology Asymmetries, Group Algebra, and Multiplant Cost Minimization," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 183-192, January.
    4. Balasko, Yves, 1990. "Equivariant general equilibrium theory," Journal of Economic Theory, Elsevier, pages 18-44.
    5. Yves Balasko, 1989. "Equivariant General Equilibrium Theory," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 89.08, Institut d'Economie et Econométrie, Université de Genève.
    6. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    7. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448, December.
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    Cited by:

    1. Francois, Joseph F. & Martin, Will, 2004. "Commercial policy variability, bindings, and market access," European Economic Review, Elsevier, pages 665-679.
    2. Michael J. Dueker, 1995. "Tariffs and asset market structure: some basic comparative dynamics," Working Papers 1995-009, Federal Reserve Bank of St. Louis.
    3. Mahua Barari, 1997. "Trade policy with asset markets: The role of financial structure for time consistency," International Advances in Economic Research, Springer;International Atlantic Economic Society, pages 18-36.
    4. Michael R. Pakko, 1996. "Tariff risk and international borrowing with incomplete asset markets," Working Papers 1996-011, Federal Reserve Bank of St. Louis.
    5. repec:kap:iaecre:v:3:y:1997:i:1:p:18-36 is not listed on IDEAS

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