The Dynamics of Trade Integration and the Political Value of Commitment

Carsten Hefeker and Daniel Gros

Oxford Economic Papers, 2000, vol. 52, issue 2, 398-414

Abstract: The paper analyzes the importance of credible institutions in the process of trade liberalization. It combines aspects of credible policy announcements with adjustment costs. We show that if industries' profits are subject to adjustment costs, a dynamic link between periods arises that creates constituencies for a non-discretionary trade policy regime. The conditions for a government to select such an institutional solution are derived. Copyright 2000 by Oxford University Press.

Date: 2000
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