Tariff and Equilibrium Indeterminacy

Yan Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the role of tariffs levied on the imported production factor in a one-sector small open economy real business cycle model. We show that under perfect competition and constant returns-to-scale, the model may exhibit local indeterminacy and sunspots as tariff rates are endogenously determined by a balanced-budget rule with a constant level of government expenditures. Conversely, the economy in which the government finances endogenous public spending and transfers with fixed tariff rates is immune to indeterminacy.

Keywords: Indeterminacy; Endogenous Tariff Rate; Small Open Economy; Exogenous Government Expenditure (search for similar items in EconPapers)
JEL-codes: F41 Q43 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/11370/1/MPRA_paper_11370.pdf original version (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:pra:mprapa:11370

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().