Zhang, Yan (2008): Tariff and Equilibrium Indeterminacy.
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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.
|Item Type:||MPRA Paper|
|Original Title:||Tariff and Equilibrium Indeterminacy|
|Keywords:||Indeterminacy, Endogenous Tariff Rate, Small Open Economy, Exogenous Government Expenditure|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy
|Depositing User:||Yan Zhang|
|Date Deposited:||05. Nov 2008 01:42|
|Last Modified:||16. Feb 2013 05:03|
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