Guest Contribution: “Rising Inflation, Narrowing Policy Space”

Today we are pleased to present a guest contribution written by Justin-Damien Guénette (Senior Economist), Jongrim Ha (Senior Economist), M. Ayhan Kose (Chief Economist and Director) and Franziska Ohnsorge (Manager) from the World Bank’s Prospects Group. The findings, interpretations, and conclusions expressed in this blog are entirely those of the authors. They do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.

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On Tariffs, and Large Country Assumptions

Suppose the US puts a 10% tariff on imports from a foreign country. Will import prices (inclusive of tariffs) rise 10%? It depends on the elasticity of supply of said imports. If the elasticity of supply is less than perfect, then import prices will rise less than 10%. To see this, consider the most basic tariff graph in the known universe (from Feenstra-Taylor) – if you can’t understand it, abandon all hope for comprehension of tariff policy.

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The Times We Live In

From WaPo:

Sen. Mike Braun (R-Ind.) said Tuesday that he would be open to the Supreme Court overturning its 1967 ruling that legalized interracial marriage nationwide to allow states to independently decide the issue.

He later revised and extended his remarks.

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