Author : Sweder van Wijnbergen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (874 download)
Book Synopsis Tariffs, the Real Exchange Rate and the Terms of Trade by : Sweder van Wijnbergen
Download or read book Tariffs, the Real Exchange Rate and the Terms of Trade written by Sweder van Wijnbergen and published by . This book was released on 1989 with total page 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.