Tax Policy and Trade Liberalization : An Application to Mexico

Author/Editor:

Andrew Feltenstein

Publication Date:

December 1, 1992

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.

Series:

Working Paper No. 92/108

Subject(s):

English

Publication Date:

December 1, 1992

ISBN/ISSN:

9781451853025/1018-5941

Stock No:

WPIEA1081992

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

26

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