Overshooting adjustment to tariff liberalization

Christian Keuschnigg

Open Economies Review, 1996, vol. 7, issue 3, 237-255

Abstract: The article analyzes the dynamic effects of tariff liberalization on a small open economy. The primary focus is on nonmonotonic adjustment patterns of net lending such as overshooting or opposite short-and long run effects. When capital accumulation tilts wage income toward the future in the early transition periods, present generations perceive life-cycle type savings disincentives which create a transitory shortfall in savings. In the long run, wage profiles become flat again, and the savings deficiency vanishes. The transitory savings component may give rise to overshooting or opposite short- and long-run adjustment in the total stock of savings and net foreign assets. Copyright Kluwer Academic Publishers 1996

Keywords: transitory savings; current account; net foreign assets; overshooting; F13; F32; F41 (search for similar items in EconPapers)
Date: 1996
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DOI: 10.1007/BF01886823

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