Matteo Iacoviello (US Federal Reserve Board)

The economic effects of trade policy uncertainty

Abstract:  This paper takes a comprehensive approach to study the link between uncertainty about trade policy and the U.S. economy. It does so by developing measures of trade risk both at the firm and at the aggregate level, by estimating the effects of these measures on investment, and by interpreting these results through the lens of of a general equilibrium, open economy macro model. In the data, as in the model, higher uncertainty about trade policy deters investment and economic activity.