Who bears the burden of voluntary export restraints?

Research output: Contribution to journalArticlepeer-review

Abstract

Conventional wisdom believes that voluntary export restraints (VERs) are beneficial for the exporting country but detrimental to the importing country. Based on the benchmark model of Obstfeld and Rogoff, this paper aims to examine this belief and evaluate the welfare effects of VERs on the world economy. Analytical results find that VERs exert expansion effects on the exporting economy temporarily. The conventional view of VERs effects holds only when there is perfect competition on the goods market or when the exporting country is bigger than the importing country. On the whole, VERs deteriorate the overall welfare of the world economy.

Original languageEnglish
Pages (from-to)216-231
Number of pages16
JournalPrague Economic Papers
Issue number3
DOIs
Publication statusPublished - 2011

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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