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The economic effects of trade policy uncertainty

Dario Caldara, Matteo Iacoviello (), Patrick Molligo, Andrea Prestipino and Andrea Raffo ()

Journal of Monetary Economics, 2020, vol. 109, issue C, 38-59

Abstract: This paper studies the effects of unexpected changes in trade policy uncertainty (TPU) on the U.S. economy. Three measures of TPU are constructed using newspaper coverage, firms’ earnings calls, and tariff rates. Firm-level and aggregate macroeconomic data reveal that increases in TPU reduce business investment. The empirical results are interpreted through the lens of a two-country general equilibrium model with nominal rigidities and firms’ export participation decisions. News and increased uncertainty about higher future tariffs reduce investment and activity.

Keywords: Trade policy uncertainty; Textual analysis; Tariffs; Investment; News shocks; Uncertainty shocks (search for similar items in EconPapers)
JEL-codes: C1 D22 D80 E12 E32 F13 H32 (search for similar items in EconPapers)
Date: 2020
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Working Paper: The Economic Effects of Trade Policy Uncertainty (2019) Downloads
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DOI: 10.1016/j.jmoneco.2019.11.002

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