#2218. Macroeconomic effects of tariffs shocks: The role of the effective lower bound and the labour market

July 2026publication date
Proposal available till 30-05-2025
4 total number of authors per manuscript3510 $

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Journal’s subject area:
Finance;
Economics and Econometrics;
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Abstract:
We simulate a New Keynesian multi-country model of the world economy to assess the macroeconomic effects of US tariffs imposed on one country in the euro area (EA), and the rest of the world (RW). The model is augmented with an endogenous effective lower bound (ELB) on the monetary policy rate of the EA and country-specific labour markets with search-and-matching frictions. First, tariffs produce recessionary effects in each country. Second, if the ELB binds, then the tariff has recessionary effects on the whole EA, even if it is imposed on only one EA country and the RW.
Keywords:
DSGE models; Monetary policy; Protectionism; Unemployment

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