Heterogeneous price responses to trade policy uncertainty: Evidence from income-specific CPIs

Fikret Bilenkisi

Economics Letters, 2025, vol. 256, issue C

Abstract: This paper examines the heterogeneous effects of trade policy uncertainty (TPU) on consumer prices across the income distribution. Using income-specific CPI data and a TPU shock measure derived from monthly tariff rates, I estimate impulse responses via local projections. The results show that prices faced by top-income households rise more strongly in response to TPU shocks than those faced by low-income households. These findings suggest that uncertainty-induced demand effect is more pronounced among low-income households, highlighting the importance of accounting for heterogeneity when assessing the macroeconomic implications of TPU.

Keywords: Trade policy uncertainty; Tariff volatility; Heterogeneous pricer effects (search for similar items in EconPapers)
JEL-codes: C32 D31 E31 F13 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:256:y:2025:i:c:s0165176525004604

DOI: 10.1016/j.econlet.2025.112623

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