Impact of Trade Liberalisation on a Multi-Region Economy within an Inter-Regional Game Theoretic Framework |
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Authors: | Leong H Liew and Mahinda Siriwardana |
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Institution: | (1) School of International Business, Griffith University, Nathan, QLD, 4111, Australia;(2) Department of Economics, University of New England, Armidale, NSW, 2351, Australia |
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Abstract: | The aim of this paper is to analyse the general equilibrium effects of tariff changes in a multi-regional model that has inter-government strategic interactions, where central and regional governments react to policies of one another by implementing counter strategies to maximise their own welfare. The motivation for this paper arises from observing inter-provincial and provincial-central government competitive money creation behaviour in China and in the former Soviet Union. By engaging in competitive money creation, governments are able to cushion the impact of tariff changes on national and regional absorption. However, it is also shown that as the marginal rate of substitution of absorption for inflation increases, the impacts of tariff changes with and without competitive money creation tend to converge. |
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Keywords: | China Soviet Union strategic interactions multi-region modelling |
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