Ira Gang
Rutgers University
Department of Economics
E-mail: gang@economics.rutgers.edu

Item Number:  [J5]
Title: Differential Cash-in-Advance Constraints: A Good Reason for Protection in LDCs?
Abstract: Recently Robert Feenstra developed a new argument for trade restrictions in LDCs based on dilferential cash-in-advance or transactions constraints. We argue here that his cue for trade restrictions arises rolely because of failure to pay the appropriate interest rate on domestic currency and that in models where there is some scope for substituting labour for money in performing transactions, or leisure is endogenous, trade restrictions will always be inferior to the first&m policy of paying the optimum interest rate on domestic currency.

Reference:  Differential Cash-in-Advance Constraints: A Good Reason for Protection in LDCs?, Eastern Africa Economic Review, 2 (1986) 193-195.

Co-Author Information:
Edward Tower
Duke University
E-Mail:  

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