IMF Working Papers

Macroeconomic Consequences of Tariffs

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

January 15, 2019

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Davide Furceri, Swarnali A Hannan, Jonathan David Ostry, and Andrew K. Rose Macroeconomic Consequences of Tariffs, (USA: International Monetary Fund, 2019) accessed December 6, 2024

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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.

Subject: Foreign exchange, International trade, Production, Productivity, Protectionism, Real exchange rates, Tariffs, Taxes, Trade balance

Keywords: Africa, Exchange rate, Global, Inequality, Input tariff, Output, Output tariff effect, Productivity, Protection, Protectionism, Real exchange rates, Sensitivity analysis, Tariff change, Tariff consequence, Tariff increase, Tariff rate, Tariffs, Trade balance, Trade balance., Unemployment, WP

Publication Details

  • Pages:

    57

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2019/009

  • Stock No:

    WPIEA2019009

  • ISBN:

    9781484390061

  • ISSN:

    1018-5941