Effects of trade liberalization on domestic prices: Some evidence from Tunisian manufacturing |
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Authors: | Ali Saggay Almas Heshmati Mohamed Adel Dhif |
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Institution: | 1.Laboratoire d’Economie et de Gestion Industrielle (LEGI),Ecole Polytechnique de Tunisie,La Marsa,Tunisie;2.The University of Kurdistan Hawler (Iraq) and College of Engineering,Seoul National University,Seoul,Korea;3.Laboratoire d’Economie et de Gestion Industrielle (LEGI),Ecole Polytechnique de Tunisie,La Marsa,Tunisie |
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Abstract: | This paper presents estimates of the competitive effects of trade liberalization on domestic pricing behaviour of Tunisian
manufacturing industries. The theoretical framework is based on a dynamic flexible adjustment model of price determination
in a small open economy. It investigates the process of adjustment in price level toward a desired level. The adjustment process
is both industrial and time-specific. The empirical results show that, in the long run, domestic price responds greatly to
import penetration, followed by demand pressure. There was a negative effect from import competition on domestic price. Trade
policy is a viable policy option to promote competitiveness. (JEL: C33, E31, F14, L60) |
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