Trade Policy and Macroeconomic Balance in the World Economy PDF Download

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Trade Policy and Macroeconomic Balance in the World Economy

Trade Policy and Macroeconomic Balance in the World Economy PDF Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 145194845X
Category : Business & Economics
Languages : en
Pages : 22

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Book Description
The paper explores the relationship between trade policy and current accounts. The effect on the current account of a change in protection at home and then abroad is analyzed, assuming that the exchange rate floats. The “savings-and-investment approach” is used. It shows that there is no presumption that protection would reduce a deficit. With a fixed exchange rate, the effect on savings and investment is brought about by the reduction in absorption that is required to maintain internal balance when restrictions are imposed. A current account deficit or real appreciation may generate protectionist pressures stimulated by “conservative resistance.”