Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259822 
Year of Publication: 
2022
Series/Report no.: 
DIW Discussion Papers No. 1956
Version Description: 
This (updated) version: May 2022
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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.
Subjects: 
Trade policy shock
structural VAR
stock prices
exchange rates
interest rates
heteroskedasticity
JEL: 
C32
F13
F51
G10
Document Type: 
Working Paper

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