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Abstract
The article deals with the role of tariff protection and exchange‐rate policies in LDCs after a terms‐of‐trade shock has occurred and a new equilibrium is to be attained. Constraints concerning the domestic, foreign and public sectors are specified.
It is shown that the optimal response to the shock depends on the domestic features of the economy, as well as on its trade openness; in particular, protectionist attitudes may well be justified, and anti‐trade policies may be helpful to ease adjustment.