We build upon new developments in the international trade literature to construct a quantitative Ricardian framework similar to Caliendo and Parro (2015) to isolate and estimate the long-run economic impacts of tariff changes.
Staff analytical notes
Staff working papers
We build upon new developments in the international trade literature to isolate and quantify the long-run economic impacts of tariff changes on the United States and the global economy.
Capital-goods imports have become an increasing source of growth for the U.S. economy. To understand this phenomenon, we build a neoclassical growth model with international trade in capital goods in which agents face exogenous paths of total factor and investment-specific productivity measures.
The classical dichotomy predicts that all of the time-series variance in the aggregate real exchange rate is accounted for by non-traded goods in the consumer price index (CPI) basket because traded goods obey the Law of One Price. In stark contrast, Engel (1999) claimed the opposite: that traded goods accounted for all of the variance.
In this paper, we argue that differences in the cost structures across sectors play an important role in firms’ decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers.