Tax Policy and Trade Liberalization: An Application to Mexico

December 1, 1992

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Format: Chicago

Andrew Feltenstein. Tax Policy and Trade Liberalization: An Application to Mexico, (USA: International Monetary Fund, 1992) accessed December 26, 2024

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

We construct a dynamic general equilibrium model of an open economy and use it to examine issues of trade liberalization in Mexico. In particular, we consider the fiscal implications of quotas and tariffs and, accordingly, their removal. We show that, in the short run, there may be negative revenue effects from tariff liberalization, so that it may be necessary to raise domestic taxes to compensate for the tariff reduction. We also show that these results are highly sensitive to behavioral shifts in exports. Since such shifts are quite likely given the nature of the trade reform currently being undertaken, it is important that we qualify our results accordingly.

Subject: Budget planning and preparation, Exchange rates, Foreign exchange, Imports, International trade, Prices, Public financial management (PFM), Tariffs, Taxes, Wholesale price indexes

Keywords: Budget deficit, Budget planning and preparation, Chi cost-minimizing cost, Exchange rate, Exchange rates, Government spending, Imports, North America, Price of the quota, Public goods, Quota right, Rate of inflation, Scarcity price, Tariffs, Wholesale price index, Wholesale price indexes, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/108
Stock No:

WPIEA1081992
ISBN:

9781451853025
ISSN:

1018-5941

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