Oleg Zamulin

Konstantin Platonov

The observed global rise of protectionism during the world fi nancial crisis 2008–2010 raises the question whether trade restrictions can be justifi ed at times of recessions. The problem remains mostly unexplored on theoretical grounds. Thе authors analyse whether protectionism can stabilize output in a model of small open economy with sticky prices. The authors fi nd that if domestic goods are substitutes of the foreign, then a policy of imports restrictions can stabilize the output. However, this policy lowers welfare if we assume homogenous consumers and perfect labor mobility across the industries.