The economic effects of trade policy uncertainty

2019/11/08 by Dario Caldara, Matteo Iacoviello, Patrick Molligo +2 · 4 citations
Economics, Econometrics and Finance · #Energy, Environment, Economic Growth #Global trade and economics #Market Dynamics and Volatility

paper · doi:10.1016/j.jmoneco.2019.11.002

openalex publication_date 2019/11/08 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30

Abstract

This paper studies the effects of unexpected changes in trade policy uncertainty (TPU) on the U.S. economy. Three measures of TPU are constructed using newspaper coverage, firms’ earnings calls, and tariff rates. Firm-level and aggregate macroeconomic data reveal that increases in TPU reduce business investment. The empirical results are interpreted through the lens of a two-country general equilibrium model with nominal rigidities and firms’ export participation decisions. News and increased uncertainty about higher future tariffs reduce investment and activity.

Citations

• A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
• The Impact of Uncertainty Shocks
• Tariff scares: Trade policy uncertainty and foreign market entry by Chinese firms
• Firm-Level Political Risk: Measurement and Effects*

Cited by

• U.S. tariffs and stock prices
• Trump Tariffs and Stock Prices
• Pains or gains: Trade war, trade deficit, and tariff evasion
• Estimating the market effect of a trade war: The case of soybean tariffs

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