Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302244 
Year of Publication: 
2024
Series/Report no.: 
ISER Discussion Paper No. 1245
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
This paper first presents a dynamic model that features both real and monetary aspects of international trade and is capable of dealing with both full employment and secular unemployment. The model is then utilized to examine the effect of a tariff on the terms of trade, the trade pattern, real consumption and employment of labor. It is shown that with full employment in both countries, a tariff by the home country improves its terms of trade and increases its national welfare at the expense of the foreign country. These results however are reversed in the presence of unemployment in both countries. We also examine the asymmetric cases and calibrate our model to evaluate numerically the effect of large tariff changes. The main finding is that the tariff only worsens the economy when it is already stagnant.
Subjects: 
demand shortage
unemployment
tariffs
secular stagnation
JEL: 
E24
E31
F13
F41
J20
Document Type: 
Working Paper

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