Tariffs, the Real Exchange Rate and the Terms of Trade: On Two Popular Propositions in International Economics

Sebastian Edwards and Sweder van Wijnbergen

No 2365, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we investigate the relation between tariff changes, terms of trade changes and the equilibrium real exchange rate. For this purpose we use two models of a small open economy: (1) a three goods version of the Ricardo-Viner model; and (2) a three goods model with full intersectoral factor mobility. We show that, in general, it is not possible to know how the equilibrium real exchange rate will respond to these two disturbances. Moreover, we show that the traditional wisdom that establishes that a tariff hike will always result in a real appreciation, while a terms of trade worsening will generate an equilibrium real depreciation, is incorrect.

Date: 1987-08
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Published as Oxford Economic Papers, Vol. 39, pp. 458-464, (1987).

Downloads: (external link)
http://www.nber.org/papers/w2365.pdf (application/pdf)

Related works:
Journal Article: Tariffs, The Real Exchange Rate and the Terms of Trade: On Two Popular Propositions in International Economics (1987)
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:nbr:nberwo:2365

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2365

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().