Tariffs, Investment and the Current Account.
A dynamic specific-factors model with adjustment costs of investment is used to study the impact of tariffs on the current account. A permanent increase in tariffs generates a current account deficit, as the import-competing sector spreads the increase of the capital stock over time. A temporary increase in tariffs has ambiguous effects. If the size and duration of the tariff are large enough, a strong response in investment could outweigh the increased savings and the current account deteriorates. For small and short-lived tariffs, the postponement of investment reinforces that of consumption, leading to a current account surplus. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Year of publication: |
1991
|
---|---|
Authors: | Roldos, Jorge E |
Published in: |
International Economic Review. - Department of Economics. - Vol. 32.1991, 1, p. 175-94
|
Publisher: |
Department of Economics |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
On gradual disinflation, the real exchange rate, and the current account
Roldos, Jorge E, (1997)
- More ...