The multifaceted impact of US trade policy on financial markets

Lukas Boer, Lukas Menkhoff and Malte Rieth ()

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: We study the multifaceted effects and persistence of trade policy shocks on financial markets in a structural vector autoregression. The model is identified via event day heteroskedasticity. We find that restrictive US trade policy shocks affect US and international stock prices heterogeneously, but generally negatively overall, increasing market uncertainty, lowering interest rates, and leading to an appreciation of the US-Dollar. The effects are significant for several weeks or quarters. These effects reveal elements of both relative price shocks and uncertainty shocks of which the latter may be more important. Chinese trade policy shocks against the US further hurt US stocks.

Keywords: Trade policy shock; structural VAR; stock prices; exchange rates; interest rates; heteroskedasticity (search for similar items in EconPapers)
JEL-codes: F13 F51 G10 (search for similar items in EconPapers)
Date: 2020
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Related works:
Journal Article: The multifaceted impact of US trade policy on financial markets (2023)
Working Paper: The Multifaceted Impact of US Trade Policy on Financial Markets (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224529

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