Optimal input trade policy under economic uncertainties in a small open economy |
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Authors: | Zhongyuan Geng |
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Institution: | School of Finance, Zhejiang University of Finance and Economics, Hangzhou, China |
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Abstract: | This article theoretically analyses optimal input trade policy under economic uncertainties in a small open economy. The benchmark model explains both key business cycle moments and asset prices of a representative emerging economy, and the corresponding deterministic version of the model finds no gain by deviating from the free input trade policy. The main findings are as follows: (1) it is optimal for the government to subsidize imported intermediate inputs in the benchmark model and (2) the result is robust to various shocks, various key structural parameters and various preference specifications. |
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Keywords: | Business Cycle optimal input trade policy trade openness economic uncertainties |
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