Trade and capital-account liberalization in a keynesian economy

Rodrik, Dani

doi:10.1016/s0022-1996(87)80008-9

Cited by 35 publications

(17 citation statements)

References 11 publications

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“…Rapid reforms lead to lower adjustment costs, because rapid reforms increase incentives to relocate resources (Mussa, 1984) Although the initial drop in output may be higher, real GDP may rise to higher levels in subsequent periods (Feltenstein and Nsouli, 2003) Gradualism can minimize adjustment costs, because it generates lower short-term costs and thus less political opposition (Little et al, 1970) A gradual approach minimizes the risk of costly reform reversal under bad reform outcomes (Erbaş, 2002) Credibility Credibility can be better established through full-scale reforms (Hiemenz et al, 1992) Gradualism could enhance credibility if the short-term results are sufficiently favorable (Rodrik, 1987(Rodrik, , 1989) Feasibility It is almost impossible to design a detailed sequence of reforms; therefore, reforms should move ahead as quickly as possible (Funke, 1993) It simply takes time to implement reforms (Fischer and Gelb, 1991) Gradualism is dictated by the competition of instruments (McKinnon, 1973) …”

Section: Adjustment Costsmentioning

confidence: 99%

The speed of adjustment and the sequencing of economic reforms

Nsouli

Rached

Funke

2005

International Journal of Social Economics

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of the paper is to review the issues involved in determining the appropriate speed of adjustment and the sequencing of economic reforms, and to develop a checklist of key guidelines for policymakers as a basis for their decision-making process. Design/methodology/approach -The paper develops a conceptual framework based on a survey of the theoretical and empirical literature, and the practical experience of the authors in this area. Findings -The analysis in the paper shows that the optimal speed and sequence of reforms is country-specific. But key policy considerations can help guide policymakers in the design of their reform strategy. Practical implications -The arguments favoring a shock approach or a gradual approach are not absolute. Each country has to choose the proper speed of adjustment and sequencing of reforms by examining country-specific factors. A thorough case-by-case analysis is needed before a decision on the appropriate timing and sequencing of reforms can be made. Originality/value -The analysis in the paper leads to key reform guidelines for policymakerscovering areas such as prerequisites and resource constraints, political economy considerations, credibility and sustainability of reforms -that are instrumental in developing a well-sequenced strategy. IntroductionThe ongoing adjustment and reform efforts of developing countries, the transformation in Central and Eastern Europe and other transition countries of the former Soviet Union, and the recent crisis in East Asia have brought to the fore the importance of the speed and appropriate sequencing of adjustment efforts [1]. For policymakers, these issues are critical to their decision-making. In fact, over the past several decades, observers of internationally supported adjustment programs have tended to disagree more on the pace and sequence, than on the content, of the reform packages (Collier and Gunning, 1999).

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Section: Adjustment Costsmentioning

confidence: 99%

The speed of adjustment and the sequencing of economic reforms

Nsouli

Rached

Funke

2005

International Journal of Social Economics

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“…Unlike van Wijnbergen (1987) and Edwards and Ostry (1990) we also have unemployment in the second period. Hence, in this model, the unemployment response to trade liberalization is endogenous, as in Rodrik (1987). To find the employment dynamics we use the demand functions for labour, and then insert (17) and (18).…”

Section: Consumption C In Period T Is Measured By the Consumption Indexmentioning

confidence: 99%

“…This is so regardless of whether the tariff is meant to induce substitution in production ( 7 , ) or in consumption ( T , ) . Buffie (1984), Ocampo (1987) and Rodrik (1987) argue that trade liberalization is likely to increase unemployment. Although their models are very different from the one developed here, their employment results are somewhat analogous to the results in this paper.…”

Section: Consumption C In Period T Is Measured By the Consumption Indexmentioning

confidence: 99%

“…Then, only intraperiod substitution matters, and increased unemployment is the likely result of trade liberalization. Compared with Ocampo (1987) and Rodrik (1987), our model has two additional factors affecting the employment response to trade liberalization: the first is intertemporal substitution, and the second is wage formation. The latter is also studied by Buffie (1984), who reaches a conclusion contrary to ours.…”

Section: Consumption C In Period T Is Measured By the Consumption Indexmentioning

confidence: 99%

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Real exchange rate dynamics and trade liberalization: the case of multiple tariffs and unemployment

Torvik

1997

The Journal of International Trade & Economic Development

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In this paper, a model to study a foreseen trade liberalization is developed. Compared with earlier dynamic models, the apparatus allows for multiple tariffs and unemployment - characteristics present in most less developed countries undertaking trade liberalization. Temporary tariffs on imported consumer and intermediate goods induce intratemporal and intertemporal substitution. Both types of tariffs raise the price of present to future consumption, but have different effects on the consumer price of non-traded relative to traded goods. The path of the real exchange rate, production, and employment in particular depend on the intertemporal elasticity of substitution, wage formation, and the initial relative size of different tariffs.Dependent economy model, dynamics, trade liberalization,

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“…Using a period-analysis framework with monopolistic competition, Obstfeld and Rogoff (1995), Christiano, Eichenbaum and Evance (1997), and Hau (2000) assume that prices/wages can be modified only at the beginning of each period and examine the effects of macroeconomic policies within a period. There are also some attempts to analyze the dynamics of a competitive world economy with either price/wage rigidity (Fender, 1986;Rodrick, 1987) or sluggishness (Ploeg, 1993) in a one-commodity setting.…”

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confidence: 99%

International Spillover of Economic Fluctuations: A Dynamic Optimization Approach

Ono

2001

SSRN Journal

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After the 1990 Japanese stock market crash the Japanese economy began to stagnate whereas the U.S. economy began to expand, yet the yen tended to appreciate against the dollar. Such a phenomenon is difficult to explain in conventional models. This paper examines its mechanism using a two-country dynamic model that accommodates a liquidity trap and unemployment. If the marginal utility of consumption relative to that of liquidity declines in a country, its current account improves, which appreciates the home currency against the foreign currency. Consequently, home products lose competitiveness, causing home employment to decrease and foreign employment to increase. JEL classification: F41, F42

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Trade and capital-account liberalization in a keynesian economy

Cited by 35 publications

References 11 publications

The speed of adjustment and the sequencing of economic reforms

The speed of adjustment and the sequencing of economic reforms

Real exchange rate dynamics and trade liberalization: the case of multiple tariffs and unemployment

International Spillover of Economic Fluctuations: A Dynamic Optimization Approach

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