Macroeconomic Consequences of Tariffs

58 Pages Posted: 13 Feb 2019

See all articles by Davide Furceri

Davide Furceri

International Monetary Fund (IMF)

Swarnali Ahmed

International Monetary Fund (IMF)

Jonathan D. Ostry

International Monetary Fund (IMF)

Andrew Kenan Rose

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

Multiple version iconThere are 3 versions of this paper

Date Written: January 2019

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.

Keywords: Productivity, Unemployment, Output, protection, inequality, exchange rate, trade balance, Macroeconomic Analyses of Economic Development

JEL Classification: F13, O11

Suggested Citation

Furceri, Davide and Ahmed, Swarnali and Ostry, Jonathan D. and Rose, Andrew Kenan, Macroeconomic Consequences of Tariffs (January 2019). IMF Working Paper No. 19/9. Available at SSRN: https://ssrn.com/abstract=3333754

Davide Furceri (Contact Author)

International Monetary Fund (IMF) ( email )

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

Swarnali Ahmed

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

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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