In the paper, Kuenzel and his co-authors examine the International Monetary Fund’s (IMF) forecast accuracy of 29 key macroeconomic variables for countries in times of economic crises. In general, forecasts of the IMF add substantial informational value as they outperform naive forecast approaches. However, the paper also documents that there is room for improvement: Two-thirds of the examined macroeconomic variables are forecast inefficiently, and six variables (growth of nominal GDP, public investment, private investment, the current account, net transfers, and government expenditures) exhibit significant forecast biases.
These forecast biases and inefficiencies are mostly driven by low-income countries, perhaps reflecting larger shocks and lower data quality. Most importantly, errors in private consumption growth forecasts are the main drivers of GDP growth forecast errors. The results can help to shed light on which macroeconomic variables require further attention by the IMF in designing future forecast models.
The paper is co-authored by Theo Eicher (University of Washington), Chris Papageorgiou (International Monetary Fund), and Charis Christofides (International Monetary Fund).
Kuenzel is also the author of a paper published in the August issue of the Review of International Economics titled “Do trade flows respond to nudges? Evidence from the WTO’s Trade Policy Review Mechanism.” In the paper, Kuenzel examines whether interactions between WTO members through the Trade Policy Review Mechanism, the WTO’s prime transparency institution, lead to subsequent changes in trade flows. This question is of particular interest, as relatively little is known about the economic effects of WTO members’ communications outside of official negotiations and dispute proceedings. Kuenzel’s analysis shows that trade policy concern submissions by WTO members are more likely to lead to positive trade responses when (i) the receiving country is less concerned about terms‐of‐trade losses, (ii) the submitter is more willing to engage in WTO disputes with the reviewed member to challenge controversial trade policies, and (iii) the submitting country challenges trade policies in the nonchemical manufacturing sector. However, nudges through the TPR process are not successful in raising agricultural trade.