Macroeconomic Consequences of Tariffs

56 Pages Posted: 31 Dec 2018

See all articles by Davide Furceri

Davide Furceri

International Monetary Fund (IMF)

Swarnali Ahmed Hannan

International Monetary Fund (IMF)

Jonathan D. Ostry

International Monetary Fund (IMF)

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: December 2018

Abstract

We study the macroeconomic consequences of tariffs. We estimate impulse response functions from local projections using a panel of annual data that spans 151 countries over 1963-2014. We find that tariff increases lead, in the medium term, to economically and statistically significant declines in domestic output and productivity. Tariff increases also result in more unemployment, higher inequality, and real exchange rate appreciation, but only small effects on the trade balance. The effects on output and productivity tend to be magnified when tariffs rise during expansions, for advanced economies, and when tariffs go up, not down. Our results are robust to a large number of perturbations to our methodology, and we complement our analysis with industry-level data.

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Suggested Citation

Furceri, Davide and Ahmed Hannan, Swarnali and Ostry, Jonathan D. and Rose, Andrew Kenan, Macroeconomic Consequences of Tariffs (December 2018). NBER Working Paper No. w25402, Available at SSRN: https://ssrn.com/abstract=3308407

Davide Furceri (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
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Swarnali Ahmed Hannan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jonathan D. Ostry

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Andrew Kenan Rose

University of California - Haas School of Business ( email )

Berkeley, CA 94720
United States
510-642-6609 (Phone)
510-642-4700 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/arose

NUS Business School ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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