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Tariffs Terms Of Trade And The Real Exchange Rate In An Intertemporal Optimizing Model Of The Current Account
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Book Synopsis Tariffs, Terms of Trade, and the Real Exchange Rate in an Intertemporal Optimizing Model of the Current Account by : Sebastian Edwards
Download or read book Tariffs, Terms of Trade, and the Real Exchange Rate in an Intertemporal Optimizing Model of the Current Account written by Sebastian Edwards and published by . This book was released on 1987 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper a minimal general equilibrium intertemporal model, with optimizing consumers and producers, is developed to analyze the process of real exchange rate determination. The model is completely real, and considers a small open economy that produces and consumes three goods each period. The model is also used to analyze the way in which the current account responds to several shocks. The working of the model is illustrated for the case of two disturbances: the imposition of import tariffs, and external terms of trade shocks. In the case of import tariffs, a distinction is made between temporary, anticipated, and permanent changes. It is shown that, without imposing rigidities or adjustment costs, interesting paths for the equilibrium real exchange rate can be generated. In particular "overshooting" and movements in opposite directions in periods one and two can be observed. Precise conditions under which temporary import tariffs will improve the current account are derived. Finally, several ways in which the model can be extended to take into account other issues such as changes in the fiscal deficit, and financial deregulation are discussed in detail.
Book Synopsis The Balance of Trade, the Terms of Trade, and the Real Exchange Rate by : International Monetary Fund
Download or read book The Balance of Trade, the Terms of Trade, and the Real Exchange Rate written by International Monetary Fund and published by International Monetary Fund. This book was released on 1988-01-01 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses an intertemporal optimizing model of a small open economy to analyze how terms of trade changes affect real exchange rates and the trade balance. We consider temporary current, anticipated future, and permanent changes in the terms of trade. The results suggest that the relationship between the terms of trade and the current account (the so-called Harberger-Laursen-Metzler effect) may be quite sensitive to whether or not the model incorporates nontraded goods. Thus, the real exchange rate may be an important variable through which terms of trade shocks are transmitted to the current account.
Book Synopsis Temporary Terms of Trade Disturbances, the Real Exchange Rate and the Current Account by : Sebastian Edwards
Download or read book Temporary Terms of Trade Disturbances, the Real Exchange Rate and the Current Account written by Sebastian Edwards and published by . This book was released on 1988 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Balance of Trade, the Terms of Trade, and the Real Exchange Rate by : Jonathan D. Ostry
Download or read book The Balance of Trade, the Terms of Trade, and the Real Exchange Rate written by Jonathan D. Ostry and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses an intertemporal optimizing model of a small open economy to analyzehow terms of trade changes affect real exchange rates and the trade balance. We consider temporary current, anticipated future, and permanent changes in the terms of trade. The results suggest that the relationship between the terms of trade and the current account (the so-called Harberger-Laursen-Metzler effect) may be quitesensitive to whether or not the model incorporates nontraded goods. Thus, the realexchange rate may be an important variable through which terms of trade shocks are transmitted to the current account.
Book Synopsis Temporary Import Tariffs, the Real Exchange Rate and the Current Account by : International Monetary Fund
Download or read book Temporary Import Tariffs, the Real Exchange Rate and the Current Account written by International Monetary Fund and published by International Monetary Fund. This book was released on 1988-08-17 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper a general equilibrium intertemporal model with optimizing consumers and producers is developed to analyze how the imposition of a temporary import tariff affects the path of real exchange rates and the current account. The model is completely real, and considers a small open economy that produces and consumes three goods each period. It is shown that, without imposing rigidities or adjustment costs, interesting paths for the equilibrium real exchange rate can be generated. In particular “equilibrium overshooting” can be observed. Precise conditions under which a temporary import tariff will worsen the current account in period 1 are derived. Several ways in which the model can be extended are discussed.
Book Synopsis The Balance of Trade, the Terms of Trade, and the Real Exchange Rate by : Jonathan David Ostry
Download or read book The Balance of Trade, the Terms of Trade, and the Real Exchange Rate written by Jonathan David Ostry and published by . This book was released on 1988 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Fundamental Determinants of Exchange Rates by : Jerome L. Stein
Download or read book Fundamental Determinants of Exchange Rates written by Jerome L. Stein and published by Oxford University Press. This book was released on 1997 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This book greatly enhances our understanding of the behavior of real exchange rates. It provides an elegant model based on a solid theoretical foundation that links real exchange rates to their fundamental economic determinants and takes proper account of stock and flow considerations. The authors provide a masterful account of how changes in productivity and thrift affect the real exchange rate, and show that the long-run impact depends crucially on whether the change reflects the former fundamental (investment) or the latter (consumption). The empirical implementation uses state-of-the-art cointegration and error correction methodologies that are eminently well suited to capture the short-run adjustment of the real exchange rate to its medium- to long-run equilibrium value. The empirical results are extremely encouraging, as the economic fundamentals identified by the authors can explain a substantial part of the movement in the real exchange rate of a number of countries."--Peter Clark, International Monetary Fund
Book Synopsis Terms of Trade Disturbances, Real Exchange Rates, and Welfare by : International Monetary Fund
Download or read book Terms of Trade Disturbances, Real Exchange Rates, and Welfare written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-03-14 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many arguments that have been advanced in favor of maintaining capital controls within the EC have not paid sufficient attention to the welfare consequences of this type of market intervention. Our paper provides a simple, optimizing framework in which the welfare consequences of capital controls can be assessed. Two main issues are considered. First, how do capital controls affect the adjustment of macroeconomic variables to real disturbances? Second, what is the nature of second best arguments for maintaining capital controls given that certain distortions will remain after the European single market is in place in 1992?
Book Synopsis Transitory Terms-of-trade Shocks and the Current Account by : Maurice Obstfeld
Download or read book Transitory Terms-of-trade Shocks and the Current Account written by Maurice Obstfeld and published by . This book was released on 1982 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper uses an intertemporal perfect-foresight optimizing model to analyze the effect of transitory terms-of-trade shocks on a small open . economy's current-account and utility time profiles. An adverse terms-of-trade shift known to be temporary induces the economy to run down its stock of external assets in the period before the terms of trade revert to their initial level. Subsequently, the assets consumed during this period are reaccumulated. The current-account response is due only in part to a desire to smooth out the future consumption stream. In addition, households know that the real value of any debt incurred while the terms of trade are unfavorable will be reduced sharply when the terms of trade improve. This opportunity for intertemporal price speculation causes the time path of instantaneous utility to be discontinuous,
Author :International Monetary Fund. Research Dept. Publisher :International Monetary Fund ISBN 13 :1451930739 Total Pages :204 pages Book Rating :4.4/5 (519 download)
Book Synopsis IMF Staff papers by : International Monetary Fund. Research Dept.
Download or read book IMF Staff papers written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 1988-01-01 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt: An intertemporal optimizing model of a small open economy is used to analyze how terms of trade changes affect real exchange rates and the trade balance. Temporary current, (expected) future, and permanent changes in the terms of trade are considered. The results suggest that the relationship between the terms of trade and the current account (the so-called Harberger-Laursen-Metzler effect) is sensitive to whether the model incorporates nontradable goods. Thus, the real exchange rate may be an important variable through which terms of trade shocks are transmitted to the current account.
Book Synopsis Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy by : Partha Sen
Download or read book Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy written by Partha Sen and published by . This book was released on 1988 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyze these effects of a tariff in an intertemporal optimizing model, emphasizing the role of capital accumulation. Three types of increases in the tariff rate are considered: (i) unanticipated permanent; (ii) unanticipated temporary; (iii) anticipated permanent. There are two main general conclusions to be drawn from the analysis. The first is that the introduction (or increase) of a tariff is contractionary, both in the short run and in the long run. In particular, employment is reduced both in the short run and in the long run, so that there is no significant intertemporal tradeoff, as obtained by previous authors. The fail in the long-run capital stock causes an immediate reduction in the rate of investment, which in turn leads to a current account surplus. While this response of the current account is in accordance with much (but not all) of the existing literature, the mechanism by which it is achieved, namely the decumulation of capital, has not been previously considered. Also, the fact that the declining capital stock is accompanied by an accumulation of foreign bonds means that the savings effect of the tariff is unclear, depending upon which influence dominates. This ambiguity of savings is, however, very different from those occurring in other studies. The second major conclusions stems from the fact that the steady state depended upon the initial stocks of the assets. As a consequence, a temporary tariff, by altering these initial conditions for some later date when the tariff is removed, leads to a permanent effect on the economy.
Book Synopsis Temporary Import Tariffs, the Real Exchange Rate and the Current Account by : Sebastian Edwards
Download or read book Temporary Import Tariffs, the Real Exchange Rate and the Current Account written by Sebastian Edwards and published by . This book was released on 2006 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper a general equilibrium intertemporal model with optimizing consumers and producers is developed to analyze how the imposition of a temporary import tariff affects the path of real exchange rates and the current account. The model is completely real, and considers a small open economy that produces and consumes three goods each period. It is shown that, without imposing rigidities or adjustment costs, interesting paths for the equilibrium real exchange rate can be generated. In particular quot;equilibrium overshootingquot; can be observed. Precise conditions under which a temporary import tariff will worsen the current account in period 1 are derived. Several ways in which the model can be extended are discussed.
Book Synopsis Government Purchases and Relative Prices in a Two-Country World by : International Monetary Fund
Download or read book Government Purchases and Relative Prices in a Two-Country World written by International Monetary Fund and published by International Monetary Fund. This book was released on 1989-04-04 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effects of government expenditures on interest rates, terms of trade, and real exchange rates are examined in a three-good (importables, exportables, nontradables), two-country, intertemporal, optimizing model. Temporary spending increases (on tradable or nontradable goods) may raise or lower the world return on internationally traded bonds and may improve or worsen the current account of the country undergoing the fiscal expansion. The results are shown to differ substantially from those obtained in models employing a higher degree of commodity aggregation. The determinants of the comovement between the terms of trade and the real exchange rate are also examined.
Book Synopsis The Dynamic-optimizing Approach to the Current Account by : Assaf Razin
Download or read book The Dynamic-optimizing Approach to the Current Account written by Assaf Razin and published by . This book was released on 1993 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: The organization of this paper is as follows. Section I builds an empirically implementable model of the current account. Likewise, Section II derives the essential time series properties of the real exchange rate. Positive implications of the intertemporal approach against panel and international cross section data are analyzed in Section III. Section IV brings out evidence relevant for the normative implications of the intertemporal approach, highlighting the role of taxes and incentives, capital controls, and convergence of growth rates. Section, concludes.
Book Synopsis Tariffs, the Real Exchange Rate and the Terms of Trade by : Sebastian Edwards
Download or read book Tariffs, the Real Exchange Rate and the Terms of Trade written by Sebastian Edwards and published by . This book was released on 1987 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we investigate the relation between tariff changes, terms of trade changes and the equilibrium real exchange rate. For this purpose we use two models of a small open economy: (1) a three goods version of the Ricardo-Viner model; and (2) a three goods model with full intersectoral factor mobility. We show that, in general, it is not possible to know how the equilibrium real exchange rate will respond to these two disturbances. Moreover, we show that the traditional wisdom that establishes that a tariff hike will always result in a real appreciation, while a terms of trade worsening will generate an equilibrium real depreciation, is incorrect.
Book Synopsis Anticipated Protectionist Policies, Real Exchange Rates and the Current Account by :
Download or read book Anticipated Protectionist Policies, Real Exchange Rates and the Current Account written by and published by . This book was released on 1987 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Anticipated Protectionist Policies, Real Exchange Rates and the Current Account by : Jonathan D. Ostry
Download or read book Anticipated Protectionist Policies, Real Exchange Rates and the Current Account written by Jonathan D. Ostry and published by . This book was released on 1991 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper a general equilibrium intertemporal model, with optimizing consumers and producers, is developed to analyze how the anticipation of future import tariffs affects real exchange rates and the current account. The model is completely real, and considers a small open economy that produces and consumes three goods each period. It is shown that, without imposing rigidities or adjustment costs, interesting paths for the equilibrium real exchange rate can be generated. In particular "equilibrium overshooting" can be observed. Precise conditions under which an anticipated future import tariff will worsen the current account in period 1 are derived. Several ways in which the model can be extended are also discussed in detail. The results obtained from this model have important implications for the analysis of real exchange rate misalignment and overvaluation
