Trade fragmentation not always inflationary – BoE study
Tariffs influence prices based on how sudden the shock is and how demand adjusts, researchers say
The effect of tariffs on inflation depends on how abrupt the price shock is, as well as how aggregate demand reacts, a study by the Bank of England has argued.
In a working paper published on October 24, economists Ludovica Ambrosino, Jenny Chan and Silvana Tenreyro examine how tariffs influence prices.
They point out that scholars have mostly studied the effects of tariffs from a supply-side perspective, in which trade fragmentation increases import costs and thus exerts inflationary pressure
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