IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/174.html
   My bibliography  Save this paper

Trade restrictions with imported intermediate inputs : when does the trade balance improve?

Author

Listed:
  • Lopez, Ramon
  • Rodrik, Dani

Abstract

The author's model demonstrates that when imports are predominantly intermediate inputs - as they are in most developing countries - import restrictions can not always be relied upon to improve the trade balance. Such restrictions act as a supply shock to the economy. Unless nontraded goods are intensive users of imported intermediaries, the general equilibrium consequence of import restrictions is a large enough reduction in export supplies to swamp the direct effect of the restrictions. The result is a deterioration of the trade balance.

Suggested Citation

  • Lopez, Ramon & Rodrik, Dani, 1989. "Trade restrictions with imported intermediate inputs : when does the trade balance improve?," Policy Research Working Paper Series 174, The World Bank.
  • Handle: RePEc:wbk:wbrwps:174
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1989/03/01/000009265_3960927172220/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Maurice Obstfeld, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 251-270.
    2. Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, vol. 13(1), pages 55-57.
    3. Charles Engel & Kenneth Kletzer, 1986. "Tariffs, Saving and the Current Account," NBER Working Papers 1869, National Bureau of Economic Research, Inc.
    4. Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lensink, Robert, 1995. "Foreign exchange constraints and developing countries," Economic Modelling, Elsevier, vol. 12(2), pages 179-191, April.
    2. Jiandong Ju & Kala Krishna, 2005. "Firm behaviour and market access in a Free Trade Area with rules of origin," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(1), pages 290-308, February.
    3. Sajal Lahiri & Anjum Nasim, 2005. "Commercial Policy Reform in Pakistan: Opening up the Economy under Revenue Constraints," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(6), pages 723-739, November.
    4. Chambers, Robert G., 1990. "A Note on Optimal-Revenue Tariffs and the Uniform Tariff," Working Papers 197744, University of Maryland, Department of Agricultural and Resource Economics.
    5. Jiandong Ju & Kala Krishna, "undated". "Market Access and Welfare Effects of Free Trade Areas without Rules of Origin," EPRU Working Paper Series 96-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    6. Jiandong Ju & Kala Krishna, 1997. "Market Access and Welfare Effects of Piecemeal Policy Reform," NBER Working Papers 6294, National Bureau of Economic Research, Inc.
    7. Lahiri, Sajal & Nasim, Anjum & Ghani, Jawaid, 2000. "Optimal second-best tariffs on an intermediate input with particular reference to Pakistan," Journal of Development Economics, Elsevier, vol. 61(2), pages 393-416, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael J. Dueker, 1995. "Tariffs and asset market structure: some basic comparative dynamics," Working Papers 1995-009, Federal Reserve Bank of St. Louis.
    2. Sebastian Edwards, 1988. "Temporary Terms of Trade Disturbances, The Real Exchange Rate and the Current Account," NBER Working Papers 2629, National Bureau of Economic Research, Inc.
    3. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-831, November.
    4. Shinsuke Ikeda, 2003. "Tariffs, Time Preference, and the Current Account under Weakly Nonseparable Preferences," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 101-113, February.
    5. Persson, Torsten, 1985. "Deficits and intergenerational welfare in open economies," Journal of International Economics, Elsevier, vol. 19(1-2), pages 67-84, August.
    6. Sebastian Edwards & Jonathan D. Ostry, 1987. "Anticipated Protectionist Policies, Real Exchange Rates and the Current Account," NBER Working Papers 2214, National Bureau of Economic Research, Inc.
    7. Sebastian Edwards, 1987. "Tariffs, Terms or Trade, and The Real Exchange Rate in and Intertemporal Optimizing Model of the Current Account," UCLA Economics Working Papers 429, UCLA Department of Economics.
    8. Narayan, Seema & Narayan, Paresh Kumar & Tobing, Lutzardo, 2021. "Has tourism influenced Indonesia’s current account?," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 225-237.
    9. PAUL CASHIN & C. JOHN McDERMOTT, 1998. "Are Australia's Current Account Deficits Excessive?," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 346-361, December.
    10. Selahattin Dibooglu, 1997. "Accounting for US current account deficits: an empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 787-793.
    11. Garg, Bhavesh & Prabheesh, K.P., 2021. "Testing the intertemporal sustainability of current account in the presence of endogenous structural breaks: Evidence from the top deficit countries," Economic Modelling, Elsevier, vol. 97(C), pages 365-379.
    12. repec:ebl:ecbull:v:6:y:2008:i:11:p:1-11 is not listed on IDEAS
    13. Turnovsky, Stephen J., 1993. "The impact of terms of trade shocks on a small open economy: A stochastic analysis," Journal of International Money and Finance, Elsevier, vol. 12(3), pages 278-297, June.
    14. Calderon Cesar Augusto & Chong Alberto & Loayza Norman V., 2002. "Determinants of Current Account Deficits in Developing Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-33, March.
    15. Michael L. Mussa, 1986. "The Effects of Commercial, Fiscal, Monetary, and Exchange Rate Policies on the Real Exchange Rate," NBER Chapters, in: Economic Adjustment and Exchange Rates in Developing Countries, pages 43-88, National Bureau of Economic Research, Inc.
    16. António Afonso & Florence Huart & João Tovar Jalles & Piotr Stanek, 2020. "Long-run relationship between exports and imports: current account sustainability tests for the EU," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 19(2), pages 155-170, May.
    17. Davis, George K. & Miller, Norman C., 1996. "Exchange rate mean reversion from real shocks within an intertemporal equilibrium model," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 947-967, December.
    18. Luis N. Lanteri, 2015. "Efecto Harberger-Laursen-Metzler. Evidencia para Argentina (1986-2014)," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 1, pages 1-1, December.
    19. Jorge Fornero & Markus Kirchner, 2018. "Learning about Commodity Cycles and Saving-Investment Dynamics in a Commodity-Exporting Economy," International Journal of Central Banking, International Journal of Central Banking, vol. 14(2), pages 205-262, March.
    20. Kim, Soyoung & Kim, Sunghyun H. & Wang, Yunjong, 2007. "Saving, investment and international capital mobility in East Asia," Japan and the World Economy, Elsevier, vol. 19(2), pages 279-291, March.
    21. Persson, Torsten & Svensson, Lars E O, 1985. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 43-65, February.

    More about this item

    Keywords

    Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade Policy; Rules of Origin;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:174. 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: . General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.