SHORT-RUN CONSEQUENCES OF TRADE LIBERALIZATION - A COMPUTABLE GENERALEQUILIBRIUM-MODEL OF ZIMBABWE

The elimination of import controls represents a challenging adjustment process for any economy. The mechanisms are investigated by the use o f an economy-wide model of Zimbabwe. A benchmark version assumes impor t rationing and protection of domestic markets in an economy with unem ployment of unskilled labor. Rather than modeling trade liberalization as a decrease in tariffs, we view it as a regime shift, requiring a n ew model closure. Compared with previous computable general equilibriu m studies of trade liberalization, the analyses includes two expansion ary channels, intermediate imports and savings response. It is shown t hat a combined consumption boom, short-run contraction, and growing tr ade deficit are likely, due to drop of savings and demand switching to foreign goods. (C) 1998 Society for Policy Modeling. Published by Els evier Science Inc.