Non-traded goods and optimal trade policy in a cash-in-advance economy

Yip, Chi-Chur Chao, Chong K.

Journal of International Trade & Economic Development, 2001, vol. 10, issue 1, pages 23-37

Abstract: This paper develops a standard trade model of a small open monetary economy with two traded and one non-traded goods. Money is introduced through a generalized cash-in-advance constraint where the share of goods purchases that must be made using cash, varies across sectors. We find that free trade may be harmful so that alternative policy instruments may be considered to improve welfare. In addition, we study and compare the optimal tariff formula and the optimal consumption tax structure. In the presence of a monetary distortion of the non-traded good, a consumption tax may not Pareto dominate a tariff although the latter bears an additional production burden. This corroborates the theory of second best.

Keywords: Trade Policy Non-TRADED Goods Cash In Advance (search for similar items in EconPapers)
Date: 2001
View list of references

Downloads: (external link)
http://taylorandfrancis.metapress.com/link.asp?tar ... &id=3E0F01DDFUN8FLFE (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:taf:jitecd:v:10:y:2001:i:1:p:23-37

Ordering information: This journal article can be ordered from
http://www.tandf.co.uk/journals/subscription.html

Access Statistics for this article

Journal of International Trade & Economic Development is edited by Pasquale M. Sgro and Bharat R. Hazari

More articles in Journal of International Trade & Economic Development from Taylor and Francis Journals
Series data maintained by Christopher F. Baum ().