01720cas a2200253 a 4500 AALejournalIMF015042 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498372671 1018-5941 BD-DhAAL BD-DhAAL Ganelli, Giovanni. Value of WTO Trade Agreements in a New Keynesian Model / Giovanni Ganelli, Juha Tervala. Washington, D.C. : International Monetary Fund, 2015. 1 online resource (35 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 We revisit the question of the quantitative benefits of WTO trade agreements in a setup that is non-standard from the traditional trade policy point of view. We show that in a New Keynesian model, unilateral trade liberalization reduces welfare due to terms-of-trade deterioration, creating an incentive for a trade agreement. For realistic parameter values, the value of an agreement, which cuts tariffs by one percentage point, is 0.5% to 2% of consumption, much larger than in trade models. The intuition for this result hinges on some New Keynesian features of our framework, such as imperfect competition and endogenous labor supply. Mode of access: Internet Tervala, Juha. IMF Working Papers; Working Paper ; No. 2015/037 Full text available on IMF http://elibrary.imf.org/view/journals/001/2015/037/001.2015.issue-037-en.xml IMF e-Library