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Calibrating Monetary Policy
How do policymakers decide on a path for interest rates that best achieves the Federal Reserve’s dual mandate of ensuring price stability and maximum employment? This question is at the heart of U.S. monetary policy, and it is extraordinarily difficult to answer. To achieve the dual mandate, Fed policymakers adjust the current and anticipated future levels of the federal funds rate—the policy path (Choi et al. 2022).
The Macroeconomic Effects of Tariffs: Insights from 180 Years of U.S. Trade Policy
This paper unifies and extends two prior working papers: “The Macroeconomic Effects of Tariffs: Evidence from U.S. Historical Data” (Den Besten and Känzig) and “What Is a Tariff Shock? Insights from 150 Years of Tariff Policy” (Barnichon and Singh).
What Can History Tell Us About Tariff Shocks?
The 15% increase in the average U.S. tariff rate in 2025 was the largest in the modern era. Assessing the likely impacts of such a large and sudden change, or tariff shock, on unemployment and inflation is crucial for monetary policy discussions. In general, if a tariff shock raises inflation, tighter monetary policy could help tame the inflation increase, if other factors remain constant.
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