NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tariff Liberalization Policy and Financial Restrictions

Joshua Aizenman

NBER Working Paper No. 1253 (Also Reprint No. r0699)
Issued in December 1983
NBER Program(s):   ITI   IFM

The purpose of this paper is to assess how restrictions on capital mobility affect adjustment to a tariff liberalization policy. This is done by comparing the adlustment process under free and restricted convertibility of foreign assets in a regime where the commercial exchange rate is pegged. It is shown that trade liberalization causes in the short run a larger drop in domestic goods prices and a smaller current account deficit in a regime with restricted convertibility. Similar results apply also for the long-run current account effects of the liberalization: they are smaller under financial restrictions.

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Document Object Identifier (DOI): 10.3386/w1253

Published: Aizenman, Joshua. "Tariff Liberalization Policy and FInancial Restrictions." Journal of International Economics, Vol. 19, (1985), pp. 241-255.

 
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