The Demand for Trade Protection over the Business Cycle

Stéphane Auray, Michael B. Devereux and Aurélien Eyquem

Journal of Money, Credit and Banking, 2024, vol. 56, issue 4, 865-898

Abstract: We build measures of the demand for trade protection, and relate them to permanent productivity and transitory monetary shocks identified from U.S. data. The demand for trade protection is countercyclical conditional on productivity shocks and procyclical conditional on monetary shocks. A two‐country dynamic stochastic general equilibrium (DSGE) model with trade in intermediate and final goods, sticky prices, and incomplete financial markets is proposed, in which tariffs are determined in a repeated noncooperative policy game. The resulting trade policies are consistent with the empirical evidence about the cyclical pattern of trade protection demand.

Date: 2024
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https://doi.org/10.1111/jmcb.13039

Related works:
Working Paper: The Demand for Trade Protection over the Business Cycle (2023)
Working Paper: The Demand for Trade Protection over the Business Cycle (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:56:y:2024:i:4:p:865-898

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