Uncertainty about Trade Policy Uncertainty

15 Pages Posted: 25 Mar 2020

See all articles by Gianluca Benigno

Gianluca Benigno

London School of Economics & Political Science (LSE) - Department of Economics

Jan J. Groen

Federal Reserve Bank of New York

Date Written: March 2020

Abstract

We revisit in this note the macroeconomic impact of the recent rise in trade policy uncertainty. As in the literature, we do find that high trade policy uncertainty can adversely impact domestic and foreign economic activity. In addition, we identify an alternative business sentiment channel that is separate and distinct from the impact of trade policy uncertainty, which provides a complementary explanation of the recent developments in the U.S. and global economic activities. This sentiment channel also implies that subsiding trade policy uncertainty does not necessarily result in a recovery of the manufacturing sector and investment spending as long as business sentiment remains negative.

Keywords: uncertainty, trade policy, business sentiment

JEL Classification: C11, C22

Suggested Citation

Benigno, Gianluca and Groen, Jan J., Uncertainty about Trade Policy Uncertainty (March 2020). FRB of New York Staff Report No. 919, Available at SSRN: https://ssrn.com/abstract=3560570 or http://dx.doi.org/10.2139/ssrn.3560570

Gianluca Benigno (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7807 (Phone)

Jan J. Groen

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

HOME PAGE: http://nyfedeconomists.org/groen/

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