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- Publisher
- Springer Journals
- Copyright
- 2015 Japanese Economic Association
- ISSN
- 1352-4739
- eISSN
- 1468-5876
- DOI
- 10.1111/jere.12050
- Publisher site
- See Article on Publisher Site
Abstract
Abstract This paper develops a two-country model that incorporates offshoring opportunities, and analyses the effects of tariffs under economic stagnation in a liquidity trap that causes unemployment. We find that a rise in tariffs on imports of outsourced goods contributes to an increase in employment by inducing a shift in production, but also leads to an appreciation of the real exchange rate that tends to reduce employment. The effect of real exchange rate appreciation dominates the effect of the production shift, and accordingly employment and consumption fall. The effects of tariff adjustments are reversed, however, when there is no liquidity trap and hence no unemployment.
Journal
The Japanese Economic Review – Springer Journals
Published: Sep 1, 2015
Keywords: economics, general; microeconomics; macroeconomics/monetary economics//financial economics; econometrics; development economics; economic history