Effects of Trade Liberalization on Domestic Prices: Some Evidence from Tunisian Manufacturing

Ali Saggay (), Almas Heshmati () and Mohamed Adel Dhif ()

No 96, Ratio Working Papers from The Ratio Institute

Abstract: This paper presents estimates of the competitive effects of trade liberalization on domestic pricing behaviour of Tunisian manufacturing industries. The theoretical framework is based on a dynamic flexible adjustment model of price determination in a small open economy. It investigates the process of adjustment in price level toward a desired level. The adjustment process is both industrial and time-specific. The empirical results show that, in the long run, domestic price responds greatly to import penetration, followed by demand pressure. There was a negative effect from import competition on domestic price. Trade policy is a viable policy option to promote competitiveness.

Keywords: dynamic model; domestic price; trade liberalization; panel data; speed of adjustment; Tunisia (search for similar items in EconPapers)
JEL-codes: C33 E31 F14 L60 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2006-04-25
New Economics Papers: this item is included in nep-afr, nep-int and nep-mac
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Journal Article: Effects of trade liberalization on domestic prices: Some evidence from Tunisian manufacturing (2007)
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