Foreign Trade in Macroeconomic Models: Equilibrium, Optimum, and Tariffs

Zalai, E. (1982). Foreign Trade in Macroeconomic Models: Equilibrium, Optimum, and Tariffs. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-82-132

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Abstract

The treatment of foreign trade has a great influence on the results that can be obtained from multisectoral macroeconomic models. This manifests itself clearly in the problem of overspecialized solutions which arises in most of the models currently in use. This unwanted phenomenon is treated differently in the two main classes of models: programming models and general equilibrium models.

This paper discusses the theoretical and methodological problems related to this issue using a special comparative framework (laissez-faire equilibrium and planner's optimum). Attention is focussed on alternative export specifications and optimum tariff problems. The argument is illustrated by numerical results based on two models of the Hungarian economy.

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