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On the robustness of short run gains from trade reform

Rees, Lucy; Rod, Tyers

Description

The long run gains from reductions in distortionary tariffs are robustly positive in neoclassical economies. In the short run, however, depending on the prevailing exchange rate and tax regimes, a combination of producer price deflation and nominal wage stickiness can cause trade liberalisation to be contractionary. Because trade liberalisation, taken alone, reduces the home prices of foreign goods, there is a substitution away from home produced goods and a real depreciation. Under the...[Show more]

CollectionsANU Research Publications
Date published: 2004
Type: Working/Technical Paper
URI: http://hdl.handle.net/1885/42594
http://digitalcollections.anu.edu.au/handle/1885/42594

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