Tariffs as Cost-Push Shocks: Implications for Optimal Monetary Policy /

We study the optimal monetary policy response to the imposition of tariffs in a model with imported intermediate inputs. In a simple open-economy framework, we show that a tariff maps exactly into a cost-push shock in the standard closed-economy New Keynesian model, shifting the Phillips curve upwar...

Ausführliche Beschreibung

1. Verfasser:

Werning, Iván

Körperschaft:

National Bureau of Economic Research

Weitere Verfasser:

Lorenzoni, Guido, Guerrieri, Veronica

Format:

Elektronisch E-Book

Sprache:

Englisch

Veröffentlicht:

Cambridge, Mass. National Bureau of Economic Research 2025.

Zusammenfassung:

We study the optimal monetary policy response to the imposition of tariffs in a model with imported intermediate inputs. In a simple open-economy framework, we show that a tariff maps exactly into a cost-push shock in the standard closed-economy New Keynesian model, shifting the Phillips curve upward. We then characterize optimal monetary policy, showing that it partially accommodates the shock to smooth the transition to a more distorted long-run equilibrium--at the cost of higher short-run inflation.

Umfang:

1 online resource: illustrations (black and white);

Anmerkungen:

May 2025.

Schlagworte:

Monetary Policy, Central Banking, and the Supply of Money and Credit

Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

Macroeconomic Aspects of International Trade and Finance