Anti-Dumping Duties and Macroeconomic Dynamics in a Floating Exchange Rate Regime

Abstract

Based on the New Open Economy Macroeconomics, this paper tries to combine the characters of imperfect competition and dumping behaviors into a two-country model with micro-foundation in order to make a comparison between long-term and short-term effects of macroeconomic variables (for example, consumption, output, price, exchange rate, terms of trade), when a foreign country dumps its goods to home country and home country imposes an anti-dumping duty on imported goods. By way of theoretical derivation and simulation analysis, this paper gets a result that consumption and output will undershoot, exchange rate and terms of trade will have a mis-adjustment, but the dynamic effect on the price will be dependent on dumping margin, if the dumping margin is lower, the price will undershoot, if the dumping margin is higher, the price will have a mis-adjustment.