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Value of WTO Trade Agreements in a New Keynesian Model, Giovanni Ganelli, Juha Tervala

We revisit the question of the quantitative benefits of WTO trade agreements in a setup that is non-standard from the traditional trade policy point of view. We show that in a New Keynesian model, unilateral trade liberalization reduces welfare due to terms-of-trade deterioration, creating an incentive for a trade agreement. For realistic parameter values, the value of an agreement, which cuts tariffs by one percentage point, is 0.5% to 2% of consumption, much larger than in trade models. The intuition for this result hinges on some New Keynesian features of our framework, such as imperfect competition and endogenous labor supply
Table Of Contents
Cover; Value of WTO Trade Agreements in a New Keynesian Model; I. INTRODUCTION; II. THE MODEL; A. Households; B. The Government; C. Firms; D. The Consolidated Budget Constraint; E. The Initial Steady State; III. PARAMETERIZATION; IV. EFFECTS OF A UNILATERAL TARIFF REDUCTION; V. VALUE OF WTO TRADE AGREEMENTS; VI. CONCLUSIONS; REFERENCES
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (36 p.)
Specific Material Designation
Form Of Item

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