TY  - JOUR
AU  - Edwards,Sebastian
AU  - Ostry,Jonathan D.
TI  - Anticipated Protectionist Policies, Real Exchange Rates and the Current Account
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2214
PY  - 1991
Y2  - February 1991
UR  - http://www.nber.org/papers/w2214
L1  - http://www.nber.org/papers/w2214.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Business
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu

Jonathan D. Ostry
Research Department
International Monetary Fund
HQ1-10-700
700 19th Street, N.W.
Washington DC, 20431
E-Mail: jostry@imf.org
AB  - In this paper a general equilibrium intertemporal model, with optimizing consumers and producers, is developed to analyze how the anticipation of future import tariffs affects real exchange rates and the current account. The model is completely real, and considers a small open economy that produces and consumes three goods each period. It is shown that, without imposing rigidities or adjustment costs, interesting paths for the equilibrium real exchange rate can be generated. In particular "equilibrium overshooting" can be observed. Precise conditions under which an anticipated future import tariff will worsen the current account in period 1 are derived. Several ways in which the model can be extended are also discussed in detail. The results obtained from this model have important implications for the analysis of real exchange rate misalignment and overvaluation.
ER  -