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Journal Article
The Economic Effects of Tariffs
The United States announced new, higher tariff rates this year. Tariffs can affect supply chains, investment, and firms’ input costs, resulting in supply-side effects such as higher inflation and higher unemployment. However, tariffs can also affect spending, the demand side of the economy. Weaker demand translates to higher unemployment but lower inflation. Estimates using 40 years of international data show that, following a change in tariffs, initially the unemployment rate increases and inflation declines. Over time, however, the unemployment rate returns to normal levels while ...
Journal Article
How AI Adoption Might Affect Bank Lending
Commercial banks have led the adoption of artificial intelligence (AI) in recent years. Evidence suggests that banks using AI more intensively tend to have higher returns on assets and higher shares of problem loans. Increased AI usage is also associated with declines in the shares of small business lending. This pattern suggests that AI helps banks in processing hard data, such as credit scores and financial statements, and issuing fewer small business loans that rely more on soft information, such as personal and business relationships.
Journal Article
The Effects of Tariffs on the Components of Inflation
Tariffs are usually applied to imported goods—but in an interconnected economy, their effects can be felt in the prices of other goods and services. Estimates using data across multiple advanced economies show that inflation declines right after tariffs are imposed. This initial decline reflects decreased demand, visible in declining prices for energy such as oil, a primary commodity typically exempt from tariffs. After the initial tariff shock, inflation gradually picks up, driven first by goods and later by services, one of the more persistent categories of inflation.