Working Papers

The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty (with Malte Rieth)

[IMF Working Paper]

Abstract:  We estimate the macroeconomic effects of import tariffs and trade policy uncertainty in the United States, combining theory-consistent and narrative sign restrictions in Bayesian SVARs. We find mostly adverse consequences of protectionism, in aggregate and across sectors and space. Tariff shocks are more important than trade policy uncertainty shocks. Tariff shocks depress trade, investment, and output persistently. The general equilibrium import elasticity is -0.8. Historically, NAFTA/WTO raised output by 1-3% for twenty years. Undoing the 2018/19 measures would raise output by cumulatively 4% over three years. The findings imply higher gains of trade than partial equilibrium or static trade models, and that trade policy is little effective at redistributing economic activity across U.S. sectors or states.

Not All Energy Transitions Are Alike: Disentangling the Effects of Demand- and Supply-Side Policies on Future Oil Prices  (with Andrea Pescatori and Martin Stuermer)

[Updated WP Version] [IMF WP]

Abstract:  We use structural scenario analysis to show that the climate policy mixsupply-side versus demand-side policiescan lead to different oil price paths with diverging distributional consequences in a net-zero emissions scenario. When emission reductions are driven by demand-side policies, prices would decline to around 25 USD per barrel in 2030, benefiting consuming countries. Vice versa, supply-side climate policies aimed at curbing oil production would push up prices to above 130 USD per barrel, benefiting those producing countries that take the political decision to keep on producing. Consequently, it is wrong to assume that oil prices will necessarily decline due to the clean energy transition. As policies are mostly formulated at the country level and hard to predict at the global level, the transition will raise uncertainty about the price outlook. 

Journal Publications

Energy Transition Metals: Bottleneck for Net-Zero Emissions? (with Andrea Pescatori and Martin Stuermer)

Abstract: The energy transition requires substantial amounts of metals, including copper, nickel, cobalt, and lithium. Are these metals a bottleneck? We identify metal-specific demand shocks, estimate supply elasticities, and study the price impact of the transition in a structural scenario analysis. Prices of these four metals would reach previous historical peaks but for an unprecedented, sustained period in a net-zero emissions scenario, potentially derailing the energy transition. Their production value would rise nearly four-fold to USD 11 trillion for the period 2021 to 2040. These four metals markets alone could become as important to the global economy as the oil market.

The Multifaceted Impact of US Trade Policy on Financial Markets (with Lukas Menkhoff and Malte Rieth)

Abstract:  We study the multifaceted effects of trade policy shocks on financial markets using a structural vector autoregression identified via event day heteroskedasticity. We find that restrictive US trade policy shocks affect US and international stock prices heterogeneously, but generally negatively. They increase market uncertainty, lower US interest rates, and lead to an appreciation of the US-Dollar. The effects are significant for several weeks or quarters. Decomposing the trade policy shocks further suggests that trade policy uncertainty dominates tariff level effects. Chinese trade policy shocks against the US further hurt US stocks. 

Qualitative versus Quantitative External Information for Proxy Vector Autoregressive Analysis (with Helmut Lütkepohl)

Abstract: A major challenge for proxy vector autoregressive analysis is the construction of a suitable external instrument variable or proxy for identifying a shock of interest. Some authors construct sophisticated proxies that account for the dating and size of the shock while other authors consider simpler versions that use only the dating and signs of particular shocks. It is shown that such qualitative (sign-)proxies can lead to impulse response estimates of the impact effects of the shock of interest that are nearly as efficient as or even more efficient than estimators based on more sophisticated quantitative proxies that also reflect the size of the shock. Moreover, the sign-proxies tend to provide more precise impulse response estimates than an approach based merely on the higher volatility of the shocks of interest on event dates.

Work in Progress

Dominant Drivers of Current Account Dynamics (with Jaewoo Lee and Mingzuo Sun)

Demand for Safe Assets and Spillovers from the Global Dollar Cycle (with Cian Allen, Rudolfs Bems and Racha Moussa)