Nastasia Henry

PhD student ,  Aix-Marseille Université , Faculté d'économie et de gestion (FEG)

Henry
Status
PhD candidate
Research domain(s)
Macroeconomics
PhD
Unconventional policies in effectiveness quest
Since 2022, under the direction of Céline Gimet, Alain Venditti
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Contact
nastasia.henry[at]univ-amu.fr
Address

AMU - AMSE
5-9 Boulevard Maurice Bourdet, CS 50498
​13205 Marseille Cedex 1

Website
https://sites.google.com/view/nastasia-henry/home-page
Abstract To what extent protectionism affects growth and (de)stabilizes the economies? Although the impact of protectionism on growth has been widely explored without reaching a consensus, few has been said on its impact on macroeconomic stability. The present paper attempts to gauge more precisely its implications using a Barro-type (Barro, 1990) endogenous growth model with public debt and credit constraint where tariffs are a proxy of protectionism. Our main result is to show that when the debt level is high, and the share of foreign goods in total consumption is large enough, increasing tariffs may have a destabilizing effect generating some expectation coordination failures between multiple equilibria. We also exhibit some trade-off between tariffs and growth as tariffs are beneficial only to the low growth equilibrium which may only appear when the international interest rate is low enough. Finally, focusing on the local stability property, we show that the high BGP is always characterized by local indeterminacy, while the low BGP is always a saddle point. We then prove that tariffs may be responsible for the existence of large self-fulfilling fluctuations.
Keywords Public debt, Tariffs, Small open economy, Credit constraint, Global and local indeterminacy
Publication HAL Google Scholar
Abstract To what extent protectionism affects growth and (de)stabilizes the economies? Since 2018, some countries have resorted to protectionist measures as the United States. Although the impacts of protectionism on growth have been widely explored without reaching a consensus, few has been said on its impacts on macroeconomic stability. The present paper attempts to gauge more precisely its implications using a Barro-type (1990) endogenous growth model with public debt and credit constraint where tariffs are a proxy of protectionism. Our main result is to show that when the debt level is high, and the share of foreign goods in total consumption is large enough, increasing tariffs may have a dramatic destabilizing effect generating some expectation coordination failure between multiple equilibria and the possible existence of large self-fulfilling fluctuations. We also exhibit some trade-off between tariffs and growth as tariffs are beneficial only to the low growth equilibrium which may only appear in the globally indeterminate case. We also propose some numerical illustrations confirming the destabilizing impact of tariffs in the case of the US economy. We finally propose an Event Study analysis to confront our results. While our effects appear short lasting, two quarters, we show that the implementation of protectionism destabilizes the US economy in the short run.
Keywords Global and local indeterminacy, Credit constraint, Small open economy, Tariffs, Public debt
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