{
  "title": "Tax Policy and Trade Liberalization: An Application to Mexico",
  "publication": "IMF Working Papers, December 1, 1992",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859",
  "overlayPath": "/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/index.md",
  "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.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- A dynamic general equilibrium model of an open economy is constructed and used to examine issues of trade liberalization in Mexico.\n- The analysis focuses on the fiscal implications of quotas and tariffs and the effects of their removal.\n- Key caution: the results are highly sensitive to behavioral shifts in exports given the nature of the trade reform being undertaken."
    },
    {
      "heading": "Major findings",
      "content": "- In the short run, there may be negative revenue effects from tariff liberalization.\n- To compensate for revenue losses from tariff reduction, it may be necessary to raise domestic taxes in the short run.\n- The magnitude and direction of fiscal effects are highly sensitive to behavioral shifts in exports; such shifts are quite likely."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Prepare for possible short-run fiscal revenue shortfalls following tariff liberalization.\n- Consider temporary or permanent adjustments to domestic tax policy to offset tariff revenue losses.\n- Monitor export behavior closely during and after trade liberalization, since export responses critically affect fiscal outcomes.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/bundle-manifest.json)",
    "Authors: Andrew Feltenstein",
    "Published: December 1, 1992",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451853025.001",
    "A dynamic general equilibrium model of an open economy is constructed and used to examine issues of trade liberalization in Mexico.",
    "The analysis focuses on the fiscal implications of quotas and tariffs and the effects of their removal.",
    "Key caution: the results are highly sensitive to behavioral shifts in exports given the nature of the trade reform being undertaken.",
    "In the short run, there may be negative revenue effects from tariff liberalization.",
    "To compensate for revenue losses from tariff reduction, it may be necessary to raise domestic taxes in the short run.",
    "The magnitude and direction of fiscal effects are highly sensitive to behavioral shifts in exports; such shifts are quite likely.",
    "Prepare for possible short-run fiscal revenue shortfalls following tariff liberalization.",
    "Consider temporary or permanent adjustments to domestic tax policy to offset tariff revenue losses.",
    "Monitor export behavior closely during and after trade liberalization, since export responses critically affect fiscal outcomes."
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/index.md",
    "json": "/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/30/tax-policy-and-trade-liberalization-an-application-to-mexico-859/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T07:37:10.418Z"
}