Anticipated trade policy: New insights from an intertemporal general equilibrium model for Egypt

Author's Department

Economics Department

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https://doi.org/10.1016/j.econmod.2025.107028

All Authors

Abeer Elshennawy

Document Type

Research Article

Publication Title

Economic Modelling

Publication Date

5-1-2025

doi

10.1016/j.econmod.2025.107028

Abstract

Utilizing a multisector intertemporal general equilibrium model calibrated to data for Egypt, this study explores the nature of the transitional paths of the economy in response to anticipated and unanticipated trade policy reforms. In general, preannouncement of trade policy is advocated for reducing adjustment costs to trade liberalization. However, this study demonstrates that the preannouncement of a future tariff cut generates welfare losses. Such trade-offs must be considered when designing a trade reform. This study also provides a systematic analysis of the results’ sensitivity to assumptions about the size order of capital stock adjustment costs and the length of the lag between the announcement and implementation of the trade policy reform.

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