Financial Market Implications of Trade War

24 Pages Posted: 15 Jan 2020

See all articles by Ali K. Ozdagli

Ali K. Ozdagli

Federal Reserve Banks - Federal Reserve Bank of Dallas

Date Written: December 13, 2019

Abstract

The trade war between the United States and China has a significant impact on high-yield spreads, long-term interest rates, and stock prices. However, the 10-year-minus-2-year Treasury yield spread, whose inversion generated significant media chatter about a looming recession, does not seem to be influenced by news about the trade war. These results are consistent with the relatively modest macroeconomic impact of the trade war predicted by previous studies and suggest that the financial-market impact is primarily driven by changes in risk premia.

Keywords: trade war, financial markets, high-frequency event study

JEL Classification: F13, G12

Suggested Citation

Ozdagli, Ali K., Financial Market Implications of Trade War (December 13, 2019). Available at SSRN: https://ssrn.com/abstract=3503156 or http://dx.doi.org/10.2139/ssrn.3503156

Ali K. Ozdagli (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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