Title

Stochastic trade policy with asset markets. The role of tariff structure

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. © 1993.

Department(s)

Economics

Document Type

Article

DOI

https://doi.org/10.1016/0022-1996(93)90022-P

Publication Date

1-1-1993

Journal Title

Journal of International Economics

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