Protectionism in a liquidity trap

Wolfgang Lechthaler

No 2042, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: This paper studies the effects of protectionism as a business cycle instrument. In normal times, protectionism reduces international trade, distorts production and reduces output. However, in a liquidity trap protectionism lowers the real interest rate because inflation goes up while the nominal interest rate is stuck at the zero lower bound. This stimulates consumption and output.

Keywords: Business cycle policy; Protectionism; Liquidity trap (search for similar items in EconPapers)
JEL-codes: E12 E60 F13 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ger, nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Protectionism in a liquidity trap (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:2042

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