01765cas a2200241 a 4500 AALejournalIMF009983 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451951370 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. The "Gulliver Effect" and the "Optimal Divergence" Approach to Trade Policies : The Case of Nepal. Washington, D.C. : International Monetary Fund, 1988. 1 online resource (14 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The relevant 'size' of an economy is affected by its environment. A country could be small in the world economy yet become big in relation to its smaller neighbors, imposing on them its relative price structure and the consequences of its trade policies. We examine here the consequences of such a 'Gulliver' effect, looking at the case of Nepal whose economy is closely linked to the economy of India. Since India's protective policies are not optimal for Nepal, we consider the various alternatives for Nepal. The 'optimal divergence' is for Nepal to allow the free import of intermediate and capital goods, while, for import-competing industries, it cannot depart from India's trade policy. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1988/092 Full text available on IMF http://elibrary.imf.org/view/journals/001/1988/092/001.1988.issue-092-en.xml IMF e-Library