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Regional Trade Policy Uncertainty

Author

Listed:
  • Céline Poilly

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Fabien Tripier

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres)

Abstract

Higher uncertainty about trade policy has recessionary effects in U.S. states. First, this paper builds a novel empirical measure of regional trade policy uncertainty, based on the volatility of national import tariffs at the sectoral level and the sectoral composition of imports in U.S. states. We show that a state which is more exposed to an unanticipated increase in tariff volatility suffers from a larger drop in real output and employment, relative to the average U.S. state. We then build a regional open-economy model and we argue that the transmission channels of uncertainty shocks, in particular the precautionary-pricing channel, are magnified in regions that feature the highest import share and a strongest export intensity. Furthermore, we show that an expansionary monetary policy may amplify the regional divergence since it worsens the recession in the most-exposed region to trade policy uncertainty.

Suggested Citation

  • Céline Poilly & Fabien Tripier, 2023. "Regional Trade Policy Uncertainty," Working Papers hal-04239322, HAL.
    • Handle: RePEc:hal:wpaper:hal-04239322
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04239322
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    References listed on IDEAS

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    Keywords

    Uncertainty Shocks; Regional Effects; Precautionary Pricing; Monetary Policy; JEL classification: E32 E52 F41 Uncertainty Shocks Regional Effects Precautionary Pricing Monetary Policy; JEL classification: E32; E52; F41 Uncertainty Shocks;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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