Commercial and Monetary Policy in a North-South Macroeconomic Model: Tariffs and VERs Compared

S Mansoob Murshed

Australian Economic Papers, 1992, vol. 31, issue 59, 414-26

Abstract: The paper examines macro-commercial policy imposed by the North on the South in the context of a structuralist North-South model. The North is characterized by Keynesian unemployment with nominal wage rigidity; the South has a flex-price economy with surplus labor. As a departure from most conventional structuralist models, the North has a monetary sector with capital flows to the South. Contrary to the findings of Mundell (1961), tariffs could be expansionary for the North, especially for a Northern block such as North America. These results are reinforced if an expansionary monetary policy is pursued in conjunction with tariffs. When the protectionist instrument is a VER the South's terms of trade could improve. Copyright 1992 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:31:y:1992:i:59:p:414-26

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