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A Model of the Euro Area, China and the United States: Trade Links and Trade Wars

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  • Volha Audzei
  • Jan Bruha

Abstract

In this paper we develop a dynamic stochastic general equilibrium model featuring the euro area, the United States and China, with an exogenous rest of the world. The countries in the model are linked through trade and international bond purchases. Having estimated the model, we study several scenarios of trade wars between the countries. Our findings suggest that no country benefits from imposing tariffs in the long run. The degree to which a particular country is hurt depends on the strength of its import and export links.

Suggested Citation

  • Volha Audzei & Jan Bruha, 2020. "A Model of the Euro Area, China and the United States: Trade Links and Trade Wars," Working Papers 2020/6, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2020/6
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    More about this item

    Keywords

    Bayesian estimation; China; multi-country DSGE; trade wars;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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