(1987) External Balance Correction: Depreciation or Protection? Brookings Papers on Economic Activity 1, 249-269.
- 2. Helkie et. al. (1988) use simulation techniques on a large macroeconomic model and conclude that protectionist policies are ineffective in reducing trade imbalances while avoiding recession.
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- 3. See also Dornbusch (1987).
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- 4. See e.g., Mann (1987). Kindleberger (1986) argues that the macroeconomic effects of Smoot-Hawley were in fact contractionary.
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- 5. The exposition that follows is drawn from Dornbusch (1980, pp. 65-6) although similar analysis may be found in other texts. 6. We assume in what follows that the government runs a balanced budget:.
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- 7. The presumption of a contractionary effect is strengthened when money is introduced into the model, since the redistributed tariff revenue creates an additional demand for money, requiring a fall in income from production to clear the money market (see Chan (1978), Eichengreen (1981) and Krugman (1982)).
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- 8. Kruginan (1982) argues that, even in those circumstances when a tariff raises output and improves the terms of trade when other countries are passive, symmetric retaliation will result in lower output and unchanged terms of trade. 9. Standard trade theory shows that the tariff will tend to benefit the factor used intensively in the import competing sector. 10. We choose the G7 countries for intrinsic interest, noting that they account for over half of US imports (both dutiable and dutyfree) and tariff revenues during the sample in question. However, the bilateral tariff data exists for other countries, and! it would be interesting to extend the results to e.g., developing countries.
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- Beveridge, S. and C.R. Nelson (1981) A New Approach to Decomposition of Economic Time Series into Permanent and Temporary Components Journal of Monetary Economics 7, 151-174.
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Boyer, R.S. (1977) Commercial Policy under Alternative Exchange Rate Regimes Canadian Journal of Economics X-2, 218-232.
- Branson, W.H. (1987) Comments on `Macroeconomics and Protection in U.S. Trade Policies in a Chang~g World Economy (Stern ed.) (MIT, Cambridge).
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- Chan, K. (1978) The Employment Effects of Tariffs under a Free Exchange Rate Regime Journal of International Economics 8, 414424.
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- Edwards, S. (1989) Tariffs, Terms of Trade and the Real Exchange Rate ~conomica forthcoming.
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EichencIreen, B. (1981) A Dynamic Model of Tariffs, Output and Employment under Flexible Exchange Rates Journal of International Economics 11, 341-359.
Engle, R.F., and Yoo (1987) Forecasting and Testing in CoIntegrated Systems Journal of Econometrics 35, 143-159.
Gardner, G.W. and K.P. Kimbrough (1989) The Behavior of US Tariff Rates American Economic Review 79-1, 211-218.
Goldstein, M. and M.S. Khan (1985) Income and Price Effects in Foreign Trade Handbook of International Economics (R.W. Jones and P.B. Kenen, eds), North-Holland.
- Helkie, W., A.J. Hughes Hallett, G.J. 1-lutson, J. Marquez (1989) Protectionism and the US Trade Deficit CEPR DP. No. 286.
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Johansen, S. (1988) Statistical Analysis of Cointegration Vectors Journal of Economic Dynamics and Control, 12-2/3, 231254.
- Kindleberger, C. (1986) The World in Depression (University of California, Berkeley).
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Krugman, P. (1982) The Macroeconomics of Protection with a Floating Exchange Rate in Monetary Regimes and Protectionism (Carnegie-Rochester Series on Public Policy Volume 16, K. Brunner and A. Meltzer eds), 141-182.
- Laursen, S. and L.A. Metzler (1950) Flexible Exchange Rates and the Theory of Employment Review of Economics and Statistics 32, 281-299.
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- Mann, C. (1987) Protection and Retaliation Brookings Papers on Economic Activity 1, 311-335.
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- Mundell, R.A. (1961) Flexible Exchange Rates and Employment Policy Canadian Journal of Economics 27, 509-517.
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Mussa, M. (1974) A Monetary Approach to Balance of Payments Analysis Journal of Money, Credit and Banking 6, 333-351.
- Ostry, J.D. (1988) Intertemporal Optimizing Models of t:he Open Economy unpublished Ph.D. dissertation.
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Razin, A. and L. Svensson (1983) Trade Taxes and the CtLrrent Account Economics Letters 13-1, 55-57.
Rose, A. (1989) Why Has Trade Grown Faster than Income? unpubl ished.
Stock, J.H. and Watson, M.W. (1988) Variable Trends in Economic Time Series Journal of Economic Perspectives, 2-3, 147_l74.
- Van Wijnbergen, S. (1987) Tariffs, Employment and the Current Account International. Economic Review 28-3, 691-706.
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