Import Protection, Business Cycles, and Exchange Rates : Evidence from the Great Recession

This research estimates the impact of macroeconomic fluctuations on import protection policies over 1988:Q1-2010:Q4 for the United States, European Union, and three other industrialized economies. First, estimates on a pre-Great Recession sample pr...

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Bibliographic Details
Main Authors:	Bown, Chad P., Crowley, Meredith A.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	AGREEMENT ON SAFEGUARDS ANNUAL IMPORTS ANTIDUMPING ANTIDUMPING CASES ANTIDUMPING DUTIES ANTIDUMPING FILINGS ANTIDUMPING POLICY BILATERAL EXCHANGE RATE BILATERAL EXCHANGE RATES BILATERAL IMPORTS BILATERAL RELATIONSHIPS BILATERAL TRADE BUSINESS CYCLE BUSINESS CYCLES CAPACITY CONSTRAINTS CHANGES IN TRADE CLARITY COUNTERVAILING DUTIES COUNTERVAILING DUTY INVESTIGATION CUMULATIVE EFFECT CURRENCY CURRENCY APPRECIATIONS CURRENCY DEPRECIATIONS DEMAND SHOCKS DEPENDENT VARIABLE DEPENDENT VARIABLES DEPRESSION DEVELOPING COUNTRIES DEVELOPMENT POLICY DISPUTE SETTLEMENT DOMESTIC CURRENCY DOMESTIC CURRENCY PRICE DOMESTIC ECONOMY DOMESTIC INDUSTRY DOMESTIC MARKET DOMESTIC UNEMPLOYMENT DUMMY VARIABLES ECONOMETRIC MODELS ECONOMIC CONTRACTION ECONOMIC GROWTH ECONOMIC RESEARCH EUROPEAN UNION EXCHANGE RATE EXCHANGE RATE APPRECIATION EXCHANGE RATE APPRECIATIONS EXCHANGE RATE DATA EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE INCREASE EXCHANGE RATE MOVEMENT EXCHANGE RATE MOVEMENTS EXCHANGE RATE SHOCK EXCHANGE RATES EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORT RESTRICTIONS EXPORTERS EXPORTS EXTERNALITIES FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL CRISIS FIXED EFFECTS FOREIGN COUNTRY FOREIGN FIRM FOREIGN FIRMS FOREIGN SOURCES FORMAL ANALYSIS GENERAL AGREEMENT ON TARIFFS GLOBAL TRADE GROWTH RATE IMPERFECT COMPETITION IMPORT IMPORT DATA IMPORT GROWTH IMPORT POLICY IMPORT PRICE IMPORT PRODUCT IMPORT PROTECTION IMPORT RESTRICTION IMPORT RESTRICTIONS IMPORT TARIFFS IMPORT VALUE IMPORTED PRODUCTS IMPORTING COUNTRY IMPORTS INDUSTRIALIZED COUNTRIES INDUSTRY TRADE INTERNATIONAL BANK INTERNATIONAL BUSINESS INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRADE RULES INTERNATIONAL TRADING ITC LEGAL CONDITION LEVELS OF IMPORT LOCAL CURRENCY LOW TARIFFS MACROECONOMIC CONDITIONS MACROECONOMIC FACTORS MACROECONOMIC FLUCTUATIONS MACROECONOMIC INDICATORS MACROECONOMIC SHOCK MACROECONOMIC SHOCKS MANAGED TRADE MARGINAL COST MARKET ECONOMY MULTILATERAL NEGOTIATIONS MULTINATIONAL FIRMS NATIONAL AUTHORITY NATIONAL CURRENCY NON-MARKET ECONOMY OIL IMPORTS PATENTS POLICY RESEARCH PRICE INDEX PRICE INDICES PROTECTIONISM PROTECTIONIST RATE OF GROWTH REAL APPRECIATION REAL APPRECIATIONS REAL DEPRECIATIONS REAL EXCHANGE RATE REAL EXCHANGE RATES REAL GDP RECESSION RECESSIONS RECIPROCAL DUMPING ROBUSTNESS CHECK ROBUSTNESS CHECKS STANDARD DEVIATION STANDARD DEVIATIONS TARIFF INCREASES TARIFF PROTECTION TARIFF-RATE QUOTA TERMS OF TRADE TERMS-OF-TRADE GAINS TRADE AGREEMENTS TRADE ALERT TRADE BARRIER TRADE BARRIERS TRADE FLOWS TRADE GROWTH TRADE IN GOODS TRADE MODELS TRADE POLICIES TRADE POLICY TRADE POLICY INSTRUMENTS TRADE PROTECTION TRADE RESTRICTIONS TRADE RESTRICTIVENESS TRADE RULES TRADE VALUES TRADE VOLUME TRADING PARTNER TRADING PARTNERS UNCERTAINTY UNEMPLOYMENT RATE UNEMPLOYMENT RATES VALUE OF IMPORTS VERTICAL SPECIALIZATION WORLD ECONOMY WORLD TRADE WORLD TRADE ORGANIZATION WORLD TRADING SYSTEM WTO
Online Access:	http://documents.worldbank.org/curated/en/2012/04/16227391/import-protection-business-cycles-exchange-rates-evidence-great-recession-vol-1-pf-1 http://hdl.handle.net/10986/6040

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Summary:	This research estimates the impact of macroeconomic fluctuations on import protection policies over 1988:Q1-2010:Q4 for the United States, European Union, and three other industrialized economies. First, estimates on a pre-Great Recession sample provide evidence of three key relationships for the US and EU. Increases in domestic unemployment rates and real appreciations in bilateral exchange rates led to substantial increases in antidumping and related forms of import protection. Furthermore, economies historically imposed these bilateral import restrictions on trading partners going through their own periods of weak economic growth. Second, estimates from the pre-Great Recession model predict a major trade policy response during 2008:Q4-2010:Q4, given the realized macroeconomic shocks. New US and EU trade barriers were projected to cover up to an additional 15 percentage points of nonoil imports, well above the baseline level of 2-3 percent of import coverage immediately preceding the crisis. Third, re-estimating the model on data from the Great Recession period illustrates why the realized trade policy response differed from model predictions based on historical data. While exchange rate movements played an important role in limiting new import protection, the US and EU also "switched" from their historical behavior during the Great Recession and shifted new import protection toward trading partners experiencing economic growth and away from those that were contracting.

Import Protection, Business Cycles, and Exchange Rates : Evidence from the Great Recession

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