IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/1099.html
   My bibliography  Save this paper

The New Nexus among Trade, Industrial and Exchange-Rate Policies

Author

Listed:
  • J. David Richardson

Abstract

This paper explores the new interconnections between real and financial policies that affect international transactions. Among other conclusions are the following. (1) In a world of spatially mobile capital and reasonably accurate expectations, trends in international competitiveness and financial asset yields are tightly linked. Volatility in one causes volatility in the other. Policies that affect one affect the other.Financial policy influences real exchange rates and alters the pressures for trade and industrial policy. Trade and industrial policy causes overshooting of financial variables, and alters the pressures for financial policy.(2) Any failureto make real and financial policy stable, credible,systematic, and predictable generates volatile and costly signals to reallocate resources. The problems with this are unpredictability more than inefficiency and resource disorder more than resource mis-order.(3) Stable, credible, systematic, and transparent exchange-rate policy can allay resource disorder by limiting deviations around economic trends.Economic trends can be enhanced in the presence of well-defined market imperfections by stable, credible, systematic, and transparent trade and industrial policies. (4) To reduce the likelihood of global resource disorder, real and financial policy options may involve retreating from multilateralism and from unrealistically binding rules. Sensible and timely alternatives seem to be aggressive bilateral peacemaking, non-inclusive coalition formation, and the formulation of credible "conventions" to govern government policy, both real and financial.

Suggested Citation

  • J. David Richardson, 1983. "The New Nexus among Trade, Industrial and Exchange-Rate Policies," NBER Working Papers 1099, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1099
    Note: ITI IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w1099.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wilson, Charles A, 1979. "Anticipated Shocks and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 639-647, June.
    2. Richard Blackhurst, 1981. "The Twilight of Domestic Economic Policies," The World Economy, Wiley Blackwell, vol. 4(4), pages 357-374, December.
    3. Jonathan Eaton & Gene M. Grossman, 1985. "Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 258-272, May.
    4. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    5. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    6. Eichengreen, Barry J., 1983. "Effective protection and exchange-rate determination," Journal of International Money and Finance, Elsevier, vol. 2(1), pages 1-15, April.
    7. Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, vol. 8(4), pages 483-511, November.
    8. Harry G. Johnson, 1966. "A Model of Protection and the Exchange Rate," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(2), pages 159-163.
    9. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    10. Richardson, J. David, 1982. "Four observations on modern international commercial policy under floating exchange rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 16(1), pages 187-220, January.
    11. repec:bla:scandj:v:78:y:1976:i:2:p:280-304 is not listed on IDEAS
    12. Susan Schadler, 1977. "Sources of Exchange Rate Variability: Theory and Empirical Evidence (Sources des variations de taux de change: analyse de la théorie et observation empirique) (Fuentes de variabilidad del tipo de cam," IMF Staff Papers, Palgrave Macmillan, vol. 24(2), pages 253-296, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul R. Flacco & Leroy O. Laney & Marie C. Thursby & Thomas D. Willett, 1984. "Exchange Rates And Trade Policy," Contemporary Economic Policy, Western Economic Association International, vol. 2(4), pages 6-18, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. David Richardson, 1983. "U.S. International Trade Policies in a World of Industrial Change," NBER Working Papers 1228, National Bureau of Economic Research, Inc.
    2. Chung-Fu Lai, 2016. "Tariff, Consumption Home Bias and Macroeconomic Dynamics," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(8), pages 425-444, August.
    3. Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-680, May.
    4. Jyh-Lin Wu, 1994. "Fiscal announcements and real exchange rate dynamics," Open Economies Review, Springer, vol. 5(2), pages 177-190, March.
    5. Sebastian Edwards, 1987. "Economics Liberalization and the Equilibrium Real Exchange Rate in Developing Countries," UCLA Economics Working Papers 433, UCLA Department of Economics.
    6. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747, Elsevier.
    7. Buiter, William H & Purvis, Douglas D, 1980. "Oil, Disinflation, and Export Competitiveness : A Model of the "Dutch Disease"," The Warwick Economics Research Paper Series (TWERPS) 185, University of Warwick, Department of Economics.
    8. Sun, Xiaohua & Ren, Junlin & Wang, Yun, 2022. "The impact of resource taxation on resource curse: Evidence from Chinese resource tax policy," Resources Policy, Elsevier, vol. 78(C).
    9. Elissaios Papyrakis & Reyer Gerlagh, 2005. "Natural Resources, Innovation, and Growth," DEGIT Conference Papers c010_054, DEGIT, Dynamics, Economic Growth, and International Trade.
    10. Morck, Randall & Nakamura, Masao, 2018. "Japan's ultimately unaccursed natural resources-financed industrialization," Journal of the Japanese and International Economies, Elsevier, vol. 47(C), pages 32-54.
    11. Park, Cheolbeom & Park, Sookyung, 2013. "Exchange rate predictability and a monetary model with time-varying cointegration coefficients," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 394-410.
    12. Hilde C. Bjørnland, 1998. "Economic Fluctuations in a Small Open Economy - Real versus Nominal Shocks," Discussion Papers 215, Statistics Norway, Research Department.
    13. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2009. "How Stable Are Monetary Models of the Dollar-Euro Exchange Rate?: A Time-Varying Coefficient Approach," Discussion Papers of DIW Berlin 944, DIW Berlin, German Institute for Economic Research.
    14. Richard M. Levich, 1983. "Empirical Studies of Exchange Rates: Price Behavior, Rate Determinationand Market Efficiency," NBER Working Papers 1112, National Bureau of Economic Research, Inc.
    15. Basil Oberholzer, 2021. "Managing commodity booms: Dutch disease and economic performance," PSL Quarterly Review, Economia civile, vol. 74(299), pages 307-323.
    16. Warwick J McKibbin & Will Martin, 1998. "The East Asian Crisis: Investigating Causes and Policy Responses," Departmental Working Papers 1998-06, The Australian National University, Arndt-Corden Department of Economics.
    17. Barkoulas, John T. & Baum, Christopher F. & Caglayan, Mustafa, 2002. "Exchange rate effects on the volume and variability of trade flows," Journal of International Money and Finance, Elsevier, vol. 21(4), pages 481-496, August.
    18. Obstfeld, Maurice, 1982. "Relative Prices, Employment, and the Exchange Rate in an Economy with Foresight," Econometrica, Econometric Society, vol. 50(5), pages 1219-1242, September.
    19. John F. O. Bilson, 1984. "Exchange Rate Dynamics," NBER Chapters, in: Exchange Rate Theory and Practice, pages 175-196, National Bureau of Economic Research, Inc.
    20. Bajo-Rubio, Oscar & Berke, Burcu & McMillan, David G., 2020. "Exchange rate volatility in the eurozone," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-23.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1099. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.