Shock Versus Gradualism in Models of Rational Expectations: The Case of Trade Liberalization
Опубликовано на портале: 16-12-2003
IMF Working Paper Series. 1997. No. 97/122.
An unanticipated, immediate removal of the tariff is always superior to a gradual removal. If the shock approach of reform is precluded, a gradualist program must be evaluated by comparing the usual permanent gains from free trade with the transitory welfare losses generated from the intertemporal distortion. For certain parameters, if the duration of liberalization is extended over too long a time period, gradualist policies may be worse from a welfare standpoint than not removing the tariff at all.
An immediate implication is that a third policy option removing the tariff at once at a future date, without a previous announcement may be better than gradually removing the tariff starting at the present date. Such a policy delays the benefits of the intratemporal production gains but avoids the intertemporal distortion of a gradualist policy. In some cases the gains from avoiding these costs dominate the costs of delay.
Export Profiles of Small Landlocked Countries: A Case Study Focusing on their Implications for Lesotho
World Bank Policy Research Working Papers. 2003. No. 3085.