 Short and long run macroeconomic effects of trade policy in the presence of debt servicingSyed Murshed ISS Working Papers - General Series from International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague Abstract: The purpose of this paper is to analyze the macroeconomic effects of trade policy, when the instrument is a voluntary export restraint (VER), on both the home (imposing) country and the foreign (targeted) country. The innovation in the paper is the analysis of trade policy when debt servicing is present in the current account of the balance of payments. This captures the contemporary experience of deficit nations like the USA vis-à-vis surplus countries like China. Trade policy (VER) in the short-run affects the current account and exchange rate, leading to the accumulation of debt stocks, which have to be repaid in the long-run in the form of debt servicing flows. This leads to a major difference between the short and long-run effects of trade policy in the form of VERs, which can be expansionary and contractionary respectively for the trade policy initiating nation. Keywords: Macroeconomic effects of trade policy; debt servicing; voluntary export restraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ems:euriss:19428 Access Statistics for this paper More papers in ISS Working Papers - General Series from International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague Contact information at EDIRC. |
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