Studying the relationship between tariffs and macroeconomic variables

To enjoy trade and economic relations with other countries, a country shouldfollow certain rules and principles of international order as far as issues ofinternational exchanges are concerned. A government intervenes incommercial transactions using established tariffs as one of the tools.In this case, the government's mechanism for action is to have an impact onthe amount of imports and exports through affecting the prices of importedgoods. Obviously, a price change could have an impact on the productionand domestic consumption. The purpose of this study is to examine therelationship between tariffs and macroeconomic variables including (GDP,inflation, foreign trade balance and unemployment rate) based on data fromthe years between 1979 and 2012 by using the VAR model and Grangercausality test. The results showed that there is a mutual relationship betweentariffs and macroeconomic variables. Moreover, this relationship is negativebetween tariffs and inflation, GDP and foreign trade balance, while it'spositive with unemployment rate.

Keywords:

tariffs , Gross Domestic Product (GDP) , inflation rate , foreigntrade balance , unemployment rate