External Shocks, the Real Exchange Rate, and Tax Policy

August 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper uses a computable general equilibrium model of the economy of Trinidad and Tobago to assess the effects of trade liberalization and terms-of-trade shocks on the real exchange rate and the overall fiscal position of the government. The model is also used to evaluate the implications of alternative tax policies designed to offset the increase in the budget deficit of the central government that results from both types of external sector shocks.

Subject: Foreign exchange, Imports, International trade, Real exchange rates, Tariffs, Taxes, Trade liberalization, Value-added tax

Keywords: consumer demand, cross-price effect, exchange rate, exportable good, import volume, importable good, Imports, Real exchange rates, Tariffs, terms of trade, terms-of-trade deterioration, Trade liberalization, trade reform, traded good, Value-added tax, world price PWM, WP

Pages:
36
Volume:
1994
DOI:
https://doi.org/10.5089/9781451851090.001
Issue:
088
Series:
Working Paper No. 1994/088
Stock No:
WPIEA0881994
ISBN:
9781451851090
ISSN:
1018-5941

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Notes

Also published in Staff Papers, Vol. 42, No. 1, March 1995.

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