Year: 1991
Type: article
Abstract: This paper examines the impact of a tariff on the current account in a model which emphasizes the fact that it takes time for the production sector of an economy to adjust to a change in relative prices. Income effects of the adjustment lead to a transitory current-account surplus because the deleterious effect of the tariff on national income is larger in the long run than in the short run. In addition, relative prices ‘overshoot’ in response to the tariff, leading to an increase in the consumption rate of interest which, in turn, generates an increase in desired saving.
Author: Michael Gavin
Institution: Columbia University
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,270
Funder: Alfred P. Sloan Foundation
OpenAlex ID: W1480666249