International Economic Interdependence and Exchange‐Rate Adjustment Under Persistent Stagnation

23 Pages Posted: 21 Feb 2014

See all articles by Yoshiyasu Ono

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: March 2014

Abstract

Using a two‐country, two‐commodity dynamic optimization model with general homothetic preference for the commodities, this paper examines the effects of a tariff and a quota on consumption and employment in the case where persistent unemployment arises due to a liquidity trap. A trade restriction improves the current account, which causes the home currency to appreciate and harms the competitiveness of home firms. Therefore, home employment and consumption decrease while foreign employment and consumption increase. Tariff‐quota equivalence is found to be valid. Preference, technological and policy parameter changes that improve the current account in general worsen home unemployment.

JEL Classification: F13, F41, F42

Suggested Citation

Ono, Yoshiyasu, International Economic Interdependence and Exchange‐Rate Adjustment Under Persistent Stagnation (March 2014). Japanese Economic Review, Vol. 65, Issue 1, pp. 70-92, 2014. Available at SSRN: https://ssrn.com/abstract=2399257 or http://dx.doi.org/10.1111/jere.12012

Yoshiyasu Ono (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
149
PlumX Metrics