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Dynamic Effects of Tariff Liberalization: an Intertemporal Cge Approach *
Author(s) -
Keuschnigg Christian,
Kohler Wilhelm
Publication year - 1995
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.1995.tb00049.x
Subject(s) - economics , computable general equilibrium , tariff , welfare , overlapping generations model , investment (military) , macroeconomics , international economics , small open economy , free trade , futures studies , monetary economics , exchange rate , market economy , politics , political science , law , artificial intelligence , computer science
The paper presents a multisectoral CGE model with overlapping generations in which intertemporal optimization by households and firms determines savings and investment under perfect foresight. We calibrate the model to Austrian data and simulate a unilateral tariff liberalization scenario. We find that unilateral tariff reductions are expansionary in the long‐run but involve considerable diversity in sectoral adjustment. Foreign debt increases in the long‐run, causing an improvement in the trade balance. In terms of welfare, some old generations gain at the expense of young and future generations. Budgetary policies are shown to be crucial for several effects.