Zhang, Yan (2008): Tariff and Equilibrium Indeterminacy.
Download (218kB) | Preview
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|
Atolia M., 2006, Tax Evasion, Public Capital, and Welfare Effects of a Tariff Reform (Revised: March, 2006), Florida State University
Benhabib, J., Farmer, R.E., 1994. Indeterminacy and increasing returns. Journal of Economic Theory 63, 19--41.
Benhabib, J., Farmer, R.E., 1999. Indeterminacy and sunspots in macroeconomics. In: Taylor, J.B., Woodford, M. (Eds.), Handbook of Macroeconomics, vol. 1A. North-Holland, New York, pp. 387--448
Bergstrom, T.C., 1982. On capturing oil rents with a national excise tax, American Economic Review, March, 72, 194-201.
Bond, E., Wang P., Yip C. K., 1996. A general two-sector model of endogenous growth model with human and physical capital: balanced growth and transitional dynamics. Journal of Economic Theory 68, 149-173.
Chen Y., Zhang Y., 2008. Tariff and Equilibrium Indeterminacy--A Note. Manuscript, Shandong University and New York University. http://mpra.ub.uni-muenchen.de/10044/
De Miguel C., Manzano B., 2006. Optimal oil taxation in a small open economy. Review of Economic Dynamics 9, 438--454
Dejong D. N., Ripoll M., 2006. Tariffs and growth: An empirical Exploration of Contingent Relationship, The Review of Economics and Statistics, Vol. 88(4), 625-640, October.
Finn, M., 2000. Perfect competition and the effects of energy price increases on economic activity, Journal of Money, Credit, and Banking, 32, 400-417.
Guo, J.T., Harrison, S.G., 2004. Balanced-Budget Rules and Macroeconomic (In)stability, Journal of Economic Theory, Vol. 119, No. 2, December, 357-363
Hansen, G., 1985. Indivisible labor and the business cycles, Journal of Monetary Economics 16:309- 327.
Kindleberger, C., Lindert P., 1978. International economics (Irwin, Homewood).
Lahiri, A., 2001. Growth and equilibrium indeterminacy: the role of capital mobility. Economic Theory 17. 197-208.
Leung, C. Ka Yui, 1999. Income Tax, Property Tax, and Tariff in a Small Open Economy. Review of International Economics, 7(3), 541-554.
Loewy M. B , 2004. Optimal tariffs, optimal taxes and economic development, Journal of International Trade & Economic Development, Volume 13, Number 4 / December 2004
Maskin, E., Newbery, D., 1990. Disadvantageous oil tariffs and dynamic consistency. American Economic Review, March, 143-156.
Meng, Q., Velasco A., 2004. Market Imperfections and the Instability of Open Economies, Journal of International Economics, Vol. 64 (2).
Mourmouras, A., 1991. Infant governments and the fiscal role of tariffs, inflation, and reserve requirements, Journal of International Economics 31, 271 -- 90.
Newbery, D., 2005. Why Tax Energy? Towards a More Rational Policy, The Energy Journal, Vol. 26, No. 3.
Ramsey, F. P., 1927. A contribution to the theory of taxation, Economic Journal, 37, 47 -- 61.
Riezman, R., Slemrod J., 1987. Tariffs and collection costs, Weltwirtschaftliches Archiv. 123, no. 3, 545-550.
Rotemberg, J., Woodford, M., 1996. Imperfect competition and the effects of energy price increases on economic activity, Journal of Money, Credit, and Banking, 28, 549-577.
Schmitt-Grohe S., Uribe M., 1997 (October). Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability. Journal of Political Economy, 105, 976-1000.
Velasco, A., 1996. Animal spirits, capital repatriation and investment. Journal of International Money and Finance 15, 221-- 238.
Weder, M., 2001. Indeterminacy in the small open economy Ramsey growth model. Journal of Economic Theory 98, 339-356
Wen, Y., Aguiar-Conraria L., 2007. Understanding the Large Negative Impact of Oil Shocks, Journal of Money, Credit, and Banking, 39, 925-944.
Wen, Y., Aguiar-Conraria L., 2005. Foreign trade and equilibrium indeterminacy, Federal Reserve bank of St. Louis, 2005-041a
Wen, Y., Aguiar-Conraria L., 2006. Oil dependence and economic Instability, Federal Reserve bank of St. Louis.
Wei, C., 2003. Energy, the stock market, and the putty-clay investment model, American Economic Review, 93, 311-323.
Zhang, Y., 2008a. Tariff and Equilibrium Indeterminacy--(I), Manuscript, New York University.
Zhang, Y., 2008b. Tariff and Equilibrium Indeterminacy--(II), Manuscript, New York University.