Thomas Oatley
Associate
Professor of Political Science
Exchange Rate Movements and the Demand for Protection
International
political economy rests on issue-specific models of trade politics and exchange
rate politics. The private actors we model, however, do not always respect the
borders we draw around these issue areas. As I demonstrate, firms react to
exchange rate movements by demanding trade protection. Consequently, we need to
begin to replace issue-specific models with more general models of
international political economy. This paper takes initial steps in this
direction by incorporating exchange rate movements into the standard
Ricardo-Viner endogenous tariff model. In this framework, exchange rate
movements change the trade policy preferences of a subset of firms.
Consequently, demands for protection rise as the currency strengthens and
diminish as the currency weakens. I test the hypothesis using two measures of
administered protection petition filings in the