Authors
Publication Date
JEL Classification
E12
E60
F13
Key Words
Related Topics
Tax Policy
International Trade
Growth
Globalization
Business Cycle World
Business Cycle
This paper studies the effects of protectionism as a business cycle instrument. In normal times, protectionism reduces international trade, distorts production and reduces output. However, in a liquidity trap protectionism lowers the real interest rate because inflation goes up while the nominal interest rate is stuck at the zero lower bound. This stimulates consumption and output.
