The Demand for Trade Protection over the Business Cycle

Stéphane Auray, Michael Devereux and Aurélien Eyquem
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Michael Devereux: Vancouver school of economics, University of British Columbia - UBC - University of British Columbia [Canada], CEPR - Center for Economic Policy Research, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research

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Abstract: We build measures of the demand for trade protection, and relate them to permanent productivity and transitory monetary shocks identified from U.S. data. The demand for trade protection is countercyclical conditional on productivity shocks and procyclical conditional on monetary shocks. A two‐country dynamic stochastic general equilibrium (DSGE) model with trade in intermediate and final goods, sticky prices, and incomplete financial markets is proposed, in which tariffs are determined in a repeated noncooperative policy game. The resulting trade policies are consistent with the empirical evidence about the cyclical pattern of trade protection demand.

Date: 2023-03-03
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Published in Journal of Money, Credit and Banking, 2023, 56 (4), pp.865-898. ⟨10.1111/jmcb.13039⟩

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Related works:
Journal Article: The Demand for Trade Protection over the Business Cycle (2024)
Working Paper: The Demand for Trade Protection over the Business Cycle (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04611842

DOI: 10.1111/jmcb.13039

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