EconPapers    
Economics at your fingertips  
 

Tariffs, the exchange rate, and location

Wataru Johdo ()
Additional contact information
Wataru Johdo: Tokyo Keizai University

Economics Bulletin, 2019, vol. 39, issue 2, 741-750

Abstract: This paper employs a new open economy macroeconomics model to examine the macroeconomic effects of a rise in one country's tariff rate leading to international relocation of firms. In such a model, both the real exchange rate and international relocation of firms offer the key to an understanding the impacts of the tariff policy. The main findings of our analysis are that (i) the imposition of a tariff by the home country always increases the relative home consumption, (ii) the imposition of the tariff results in appreciation of the home currency, (iii) the appreciation then decreases the relative real profits of firms located in the home country, and consequently firms relocate to the foreign country, (iv) an increase in the flexibility of relocation weakens the responses of both the relative consumption and the exchange rate to the imposition of the tariff.

Keywords: Tariff; Relocation of firms; Exchange rate; Consumption (search for similar items in EconPapers)
JEL-codes: F4 E6 (search for similar items in EconPapers)
Date: 2019-04-03
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I2-P74.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-19-00253

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().

 
Page updated 2019-04-20
Handle: RePEc:ebl:ecbull:eb-19-00253