Séminaire NANCY – Aurélien Eyquem (Lyon 2, GATE)

Détails de l'événement :

“Trade Wars, Currency Wars”

Papier co-écrit avec Stéphane Auray et Mick Devereux

Le séminaire se fera sous une forme hybride avec une diffusion sur Teams et une présence de l’intervenant en salle Baron Louis. Si vous pensez assister en présentiel au séminaire merci de l’indiquer aux organisateurs (la salle est limitée à 25 personnes) : Antonello Lobianco (antonello.lobianco@agroparistech.fr) et Sébastien Massoni (sebastien.massoni@univ-lorraine.fr)

Abstract: For most of the post WWII period, trade protectionism followed a declining trend, contained within international agreements. Recently however, there has been a sharp shift towards unilateral, discretionary trade policy focused on short term macroeconomic objectives. This paper explores the interaction of non-cooperative trade policy and monetary policy within a standard DSGE open economy macroeconomic model. We fi\u000Cnd that a non-cooperative trade policy can signi\u000Ccantly worsen macroeconomic conditions. Moreover, the stance of monetary policy has major implications for the degree of protection in a non-cooperative equilibrium. In particular, cooperative determination of monetary policy may signi\u000Ccantly reduce welfare by increasing the size of trade restrictions. By contrast, when the exchange rate is pegged by one country, equilibrium rates of protection are generally lower, but in this case, there are multiple asymmetric equilibria in tariff\u000B rates which benefi\u000Ct one country relative to another. We also explore the determination of non-cooperative tariff\u000Bs in a situation where monetary policy is constrained by the zero lower bound on nominal interest rates. Finally, we extend the model to a situation of `dominant currency pricing’ (DCP), and show that in the non-cooperative equilibrium where trade and monetary policy are simultaneously determined under DCP there is a signi\u000Ccant welfare advantage for the country issuing the dominant currency.