Backfiring Effect of Uncertain Trade Policy

Fujita, Yasunori (2016) Backfiring Effect of Uncertain Trade Policy. Modern Economy, 07 (05). pp. 613-618. ISSN 2152-7245

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Constructing a stochastic international trade model where exporting firm faces uncertain trade policy expressed by geometric Brownian motion, we examine the effect of an increase in the trade policy uncertainty on the optimal start time of export. It is revealed that when the trade policy is less uncertain than a threshold level, an increase in the trade policy uncertainty accelerates the optimal exporting timing of export, which is in sharp contrast to the standard result that an increase in the uncertainty postpones the optimal timing. It is also revealed that such a stochastic version of the backfiring effect reduces the world welfare if demand for exported products is low, starting export is costly or future is not important.

Item Type: Article
Subjects: Middle East Library > Multidisciplinary
Depositing User: Unnamed user with email
Date Deposited: 03 Jun 2024 12:43
Last Modified: 03 Jun 2024 12:43

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