IS PROTECTIONISM RATIONAL UNDER THE FINANCIAL CRISIS? ANALYSIS FROM THE PERSPECTIVE OF INTERNATIONAL POLITICAL RELATIONS
Journal Title: Asian Economic and Financial Review - Year 2014, Vol 4, Issue 3
Abstract
Protectionism against economic globalization (free trade and FDI) always surges in the financial crises as the pressure from unemployment mounts. This paper aims to assess the rationality of the protectionism. Instead of analyzing from the pure economic efficiency perspective, this paper assesses the rationality of protectionism from the political relation perspective. By building a costly signal model, we demonstrate that the financial crisis does not change the role of trade and FDI as a signal to reduce the international conflicts and foster cooperation among countries. By employing simultaneous equation models, it is empirically found that trade/FDI and cooperation exhibit significant positive reciprocity, even in the presence of the shock. Variance decompositions from generalized VAR indicate that trade and FDI work in complement to each other to increase the cooperation. It is therefore concluded that using protectionism as a measure to deal with financial crisis is not a well-grounded policy.
Authors and Affiliations
Jie Cai| Associate Professor of Economics, School of Economics and Business Administration, Central China Normal University, Lian An| Associate Professor of Economics, Department of Economics and Geography, Coggin College of Business, University of North Florida
Keywords
Related Articles
- EP ID EP2008
- DOI -
- Views 496
- Downloads 22
TICK SIZE AND COMMONALITY IN LIQUIDITY
This study suggests that the change of tick size, particularly in a step-function tick system, accounts for cross-sectional variation in market liquidity. We explored the relative significance of commonality in liquidity...
U.S.-SINGAPORE COMMODITY TRADE AND THE J-CURVE
Limited number of studies that investigated the short-run (J-Curve) and long-run effects of currency depreciation on the trade balance of Singapore either used aggregate trade data between Singapore and rest of the world...
KOREA’S INPAYMENTS AND OUTPAYMENTS WITH THE REST OF THE WORLD: IS THERE ROOM FOR CURRENCY MANIPULATION?
In estimating the well-known Marshall-Lerner condition, researchers have used trade volume data between one country and rest of the world. To reduce aggregation bias in these studies, it is proposed to use trade data at...
SERVICE SECTOR AS AN ENGINE OF GROWTH: EMPIRICAL ANALYSIS OF PAKISTAN
The objective of the present study is to examine the determinants of service sector growth such as external debt, population, gross domestic product per capita, foreign direct investment and government consumption and em...
Vietnam Economic Structure Change Based on Input-Output Table (2000-2007)
This study presents main findings on Vietnam economic structure change based on Leontief system and the Vietnam Input-Output Tables (2000 and 2007).