Macroeconomic Consequences of Tariffs

Author/Editor:

Davide Furceri ; Swarnali A Hannan ; Jonathan David Ostry ; Andrew K. Rose

Publication Date:

January 15, 2019

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 19/9

Subject:

English

Publication Date:

January 15, 2019

ISBN/ISSN:

9781484390061/1018-5941

Stock No:

WPIEA2019009

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

57

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