Search Results
Report
The Anatomy of Tariff Pass-Through into Consumer Prices
Tariffs raise the prices of goods made at home, not just the imports they tax—an effect that standard pass-through estimates largely miss. Studying the 2025 U.S. tariffs, we find that about 26 percent of the tariff increase passes through to consumer prices. These estimates are measured relative to less-exposed goods and hold aggregate conditions fixed. The direct effect accounts for 64 percent of this increase, as tariffs raise the consumer prices of foreign varieties of a good. The remaining 36 percent arises indirectly—tariffs raise the cost of imported inputs used by U.S. producers, ...
Discussion Paper
Using Stock Returns to Assess the Aggregate Effect of the U.S.‑China Trade War
During 2018-19, the U.S. levied import tariffs of 10 to 50 percent on more than $300 billion of imports from China, and in response China retaliated with high tariffs of its own on U.S. exports. Estimating the aggregate impact of the trade war on the U.S. economy is challenging because tariffs can affect the economy through many different channels. In addition to changing relative prices, tariffs can impact productivity and economic uncertainty. Moreover, these effects can take years to become apparent in the data, and it is difficult to know what the future implications of a tariff are ...
Report
How much do bank shocks affect investment? Evidence from matched bank-firm loan data
We show that supply-side financial shocks have a large impact on firms' investment. We do this by developing a new methodology to separate firm-borrowing shocks from bank supply shocks using a vast sample of matched bank-firm lending data. We decompose loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of financial institution concentration means that individual banks are large relative to the size of the economy, which creates a role for granular shocks as in Gabaix (2011). As a result, bank supply shocks?that is, movements in ...
Discussion Paper
What Drives International Bank Credit?
A major question facing policymakers is how to deal with slumps in bank credit. The policy prescriptions are very different depending on whether the decline is a result of global forces, domestic demand, or supply problems in a particular banking system. We present findings from new research that exactly decompose the growth in banks? aggregate foreign credit into these three factors. Using global banking data for the period 2000-16, we uncover some striking patterns in bilateral credit relationships between consolidated banking systems and borrowers in more than 200 countries. The most ...
Working Paper
Why Do Firms Pay Different Interest Rates on Their Bank Loans?
We document significant variation in interest rates among similar commercial and industrial loans using confidential supervisory data on the largest US banks. This dispersion does not appear to be due to risk. We rationalize the data using a search cost model and find that search costs are highest for smaller and riskier borrowers and lower for public firms, consistent with predictable differences in the costs of screening and monitoring. We find that search costs are substantial. Over a third of firms behave as if they do not comparison shop; half of all firms appear to only obtain two ...
Report
Globalization and the gains from variety
Since the seminal work of Krugman, product variety has played a central role in models of trade and growth. In spite of the general use of love-of-variety models, there has been no systematic study of how the import of new varieties has contributed to national welfare gains in the United States. In this paper, we show that the unmeasured growth in product variety from U.S. imports has been an important source of gains from trade over the last three decades (1972-2001). Using extremely disaggregated data, we show that the number of imported product varieties has increased by a factor of four. ...
Report
Economic geography and regional production structure: an empirical investigation
There are two principal theories of why countries or regions trade: comparative advantage and increasing returns to scale. Yet there is virtually no empirical work that assesses the relative importance of these two theories in accounting for production structure and trade. We use a framework that nests an increasing returns model of economic geography featuring "home market effects" with that of Heckscher-Ohlin. We employ these trade models to account for the structure of regional production in Japan. We find support for the existence of economic geography effects in eight of nineteen ...
Discussion Paper
Did Trade Finance Contribute to the Global Trade Collapse?
The financial crisis of 2008-09 brought about one of the largest collapses in world trade since the end of World War II. Between the first quarter of 2008 and the first quarter of 2009, the value of real global GDP fell 4.6 percent while exports plummeted 17 percent, as can be seen in the chart below. The dramatic decline in world trade—a loss of $761 billion in nominal exports—came through two channels: decreased demand for imports and supply effects, most likely arising from financial constraints. In this post, we look at evidence that supply effects, including curtailed funding for ...
Discussion Paper
Who Is Paying for the 2025 U.S. Tariffs?
Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers.