IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2019-009.html
   My bibliography  Save this paper

Macroeconomic Consequences of Tariffs

Author

Listed:
  • Davide Furceri
  • Swarnali A Hannan
  • Jonathan David Ostry
  • Andrew K. Rose

Abstract

We study the macroeconomic consequences of tariffs. We estimate impulse response functions from local projections using a panel of annual data that spans 151 countries over 1963-2014. We find that tariff increases lead, in the medium term, to economically and statistically significant declines in domestic output and productivity. Tariff increases also result in more unemployment, higher inequality, and real exchange rate appreciation, but only small effects on the trade balance. The effects on output and productivity tend to be magnified when tariffs rise during expansions, for advanced economies, and when tariffs go up, not down. Our results are robust to a large number of perturbations to our methodology, and we complement our analysis with industry-level data.

Suggested Citation

  • Davide Furceri & Swarnali A Hannan & Jonathan David Ostry & Andrew K. Rose, 2019. "Macroeconomic Consequences of Tariffs," IMF Working Papers 2019/009, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2019/009
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=46469
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
    2. Xiangming Li, 2004. "Trade Liberalization and Real Exchange Rate Movement," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 553-584, November.
    3. Amelia Santos-Paulino & A. P. Thirlwall, 2004. "The impact of trade liberalisation on exports, imports and the balance of payments of developing countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 50-72, February.
    4. Jonas C. Crews & Fernando Leibovici, 2018. "Trade Liberalization and Economic Development," Economic Synopses, Federal Reserve Bank of St. Louis, issue 13, pages 1-2.
    5. Raphael A. Auer & Barthélémy Bonadio & Andrei A. Levchenko, 2020. "The Economics and Politics of Revoking NAFTA," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(1), pages 230-267, March.
    6. Artuç, Erhan & McLaren, John, 2015. "Trade policy and wage inequality: A structural analysis with occupational and sectoral mobility," Journal of International Economics, Elsevier, vol. 97(2), pages 278-294.
    7. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I.P. Ottaviano, 2012. "Productivity and Firm Selection: Quantifying the ‘New’ Gains from Trade," Economic Journal, Royal Economic Society, vol. 122(561), pages 754-798, June.
    8. Ostry, Jonathan D. & Rose, Andrew K., 1992. "An empirical evaluation of the macroeconomic effects of tarrifs," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 63-79, February.
    9. Florence Jaumotte & Subir Lall & Chris Papageorgiou, 2013. "Rising Income Inequality: Technology, or Trade and Financial Globalization?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(2), pages 271-309, June.
    10. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    11. Jiandong Ju & Yi Wu & Li Zeng, 2010. "The Impact of Trade Liberalization on the Trade Balance in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 427-449, June.
    12. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    13. JaeBin Ahn & Era Dabla‐Norris & Romain Duval & Bingjie Hu & Lamin Njie, 2019. "Reassessing the productivity gains from trade liberalization," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 130-154, February.
    14. Michael W. Klein & Christoph Moser & Dieter M. Urban, 2010. "The Contribution of Trade to Wage Inequality: The Role of Skill, Gender, and Nationality," NBER Working Papers 15985, National Bureau of Economic Research, Inc.
    15. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rick Van der Ploeg & Fidel Perez-Sebastian & Ohad Raveh, 2019. "Oil Discoveries and Protectionism," Economics Series Working Papers 895, University of Oxford, Department of Economics.
    2. Yuko Imura, 2019. "Reassessing Trade Barriers with Global Value Chains," Staff Working Papers 19-19, Bank of Canada.
    3. Brautzsch, Hans-Ulrich & Dany-Knedlik, Geraldine & Drygalla, Andrej & Gebauer, Stefan & Holtemöller, Oliver & Kämpfe, Martina & Lindner, Axel & Michelsen, Claus & Rieth, Malte & Schlaak, Thore, 2019. "Kurzfristige ökonomische Effekte eines "Brexit" auf die deutsche Wirtschaft: Studie im Auftrag des Bundesministeriums für Wirtschaft und Energie," IWH Online 3/2019, Halle Institute for Economic Research (IWH).
    4. Alessandro Ruggieri, 2019. "Trade and labour market institutions: A tale of two liberalizations," Discussion Papers 2019-15, University of Nottingham, GEP.

    More about this item

    Keywords

    Productivity; Unemployment; Output; Real effective exchange rates; Economic conditions; Economic analysis; Trade liberalization; Balance of trade; protection; inequality; exchange rate; trade balance; Macroeconomic Analyses of Economic Development; tariff increase; tariff; real exchange rate; outcome variable;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2019/009. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi) The email address of this maintainer does not seem to be valid anymore. Please ask Hassan Zaidi to update the entry or send us the correct email address. General contact details of provider: http://edirc.repec.org/data/imfffus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.