TY  - JOUR
AU  - Stockman,Alan C.
AU  - Dellas,Harris
TI  - Asset Markets, Tariffs, and Political Risk
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1413
PY  - 1987
Y2  - May 1987
UR  - http://www.nber.org/papers/w1413
L1  - http://www.nber.org/papers/w1413.pdf
N1  - Author contact info:
Alan C. Stockman
Department of Economics
University of Rochester
Rochester, NY  14627-0156
Tel: 585/275-7214
Fax: 585/256-2309
E-Mail: N/A user is deceased

Harris Dellas
Department of Economics
University of Bern
VWI, Schanzeneckstrasse 1
CH 3012 Bern
Switzerland
E-Mail: harris.dellas@vwi.unibe.ch
AB  - The paper examines a simple model in which exogenous political risk creates uncertainty about tariffs. The model predicts a relation between consumption and tariffs that differs radically from that implied by models without asset markets or political risk. Given the probability distribution of tariffs, domestic consumption and utility (ex post) are lower in states of the world with a domestic tariff and no foreign tariff than with a foreign tariff and no domestic tariff.This conclusion emerges despite the fact that the opposite would be obtained in the absence of asset markets. So economists should not be surprised if observed relations between consumption and tariffs differ from the predictions of static theory in either time-series or cross-sections.
ER  -