Working Paper: CEPR ID: DP9119
Authors: Mauro Boffa; Marcelo Olarreaga
Abstract: During the recent financial crisis many countries resorted to protectionist measures to try to boost demand for domestically-produced goods. In this paper we explore the extent to which the adoption of protectionist measures led to retaliation by other countries undermining the increase in demand. We found no evidence of retaliation. On the contrary, there is strong evidence of chicken-games being played. Indeed, the probability of a protectionist measure being imposed on a trading partner's export bundle is significantly smaller when the partner imposes a protectionist measure on home exports.
Keywords: chicken games; financial crisis; trade retaliation
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Imposition of protectionist measures by trading partners (F13) | Probability of further protectionist measures being imposed on home exports (F14) |
| Dummy variable indicating whether a partner country has imposed a protectionist measure on home exports (F10) | Imposition of protectionist measures by trading partners (F13) |
| WTO membership (F13) | Likelihood of protectionist measures being imposed (F13) |