Stochastic trade policy with asset markets

The Macroeconomic Effects of Trade Tariffs: Revisiting the Lerner Symmetry Result

“…However, as Stockman (1989) and Barari and Lapan (1993) point out, the welfare superiority of complete markets holds only under e¢ cient shocks but not for distortionary shocks such as the ones studied here. Indeed, since contracts'payo¤s are nominal (e.g., in US dollars rather than in consumption units), foreign households want to insure against a loss of the value of their own currency (vis a vis the home currency) while home consumers want to insure against higher consumption prices induced by the tari¤; hence, a full insurance arrangement where consumption volumes are equated is not an equilibrium.…”

“…Hence, because purchasing power parity does not hold, asset markets do not imply full consumption insurance. 6 Dellas and Stockman (1986) and Barari and Lapan (1993) were among the …rst papers that showed how traditional trade theory results could be overturned under complete international asset markets. 7 We calibrate both the home and foreign economy to match US trade ‡ows with the assumption that trade is balanced in the steady state.…”

Trade policy with asset markets: The role of financial structure for time consistency

“…The theoretical framework that is developed in this model is an extension of the basic model introduced in Barari and Lapan [1993]. A two-country (home country and foreign country), two-good (C and F), stochastic general equilibrium trade model is utilized where the endowments of the goods are given.…”

The Forward Exchange Rate and the Interest Rate within a Production Economy

“…g . , Barari and Lapan [1993]. The present analysis is actually motivated partly by an intrinsic criticism first clearly expressed by Kemp [1976] on price uncertainty (see the quotation in the introduction section).…”