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

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  • Bilenkisi, Fikret

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.

Suggested Citation

  • Bilenkisi, Fikret, 2025. "Heterogeneous price responses to trade policy uncertainty: Evidence from income-specific CPIs," Economics Letters, Elsevier, vol. 256(C).
    • Handle: RePEc:eee:ecolet:v:256:y:2025:i:c:s0165176525004604
    DOI: 10.1016/j.econlet.2025.112623
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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