David Kuenzel, assistant professor of economics, is the co-author of a new paper published in the July–August issue of International Journal of Forecasting titled “Forecasts in Times of Crises.”
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.
David Kuenzel, assistant professor of economics, is the coauthor of a new paper published in the September 2018 Journal of Macroeconomics titled, “Constitutional Rules as Determinants of Social Infrastructure.”
In the paper, Kuenzel and his coauthors, Theo Eicher from the University of Washington and Cecilia García-Peñalosa from Aix-Marseille University, investigate the link between constitutional rules and economic institutions, which are a key driver of economic development and economic growth.
Kuenzel and his coauthors find that the determinants of economic institutions (or social infrastructure) are much more fundamental than previously thought. In addition to constitutional rules that constrain the executive, highly detailed aspects of electoral systems such as limits on campaign contributions and the freedom to form parties are crucial factors for improving the quality of countries’ economic institutions. Moreover, Kuenzel and his colleagues show that basic human rights have profound effects on economic institutions, a dimension that previously had not been explored in the literature.
David Kuenzel, assistant professor of economics, is the author of a new paper published in the European Economic Review titled “WTO Dispute Determinants.”
In the paper, Kuenzel investigates what factors drive the decisions of World Trade Organization member countries to engage in trade disputes with each other. “Understanding the determinants of the dispute pattern is crucial, since the WTO can only function properly if its dispute settlement mechanism is equally accessible to all member countries,” Kuenzel said.
The paper presents a new theory and empirical evidence to show that trade policy flexibility, which is defined as the difference between the tariff rate a country is legally allowed to set and the tariff rate it actually applies, is the key to understanding the WTO dispute pattern. Less trade policy flexibility constrains WTO members’ legal policy options when responding to adverse shocks in the world economy, and leads more frequently to the application of illegal trade barriers.
Countries with less trade policy flexibility, Kuenzel says, are also more likely to gain from dispute filings, since WTO rulings have to be enforced by countries themselves through the threat of applying higher tariffs rates.
“Importantly, the results in the paper illustrate that the WTO’s current emphasis on providing subsidized legal advice to developing countries is not making the WTO dispute settlement mechanism more accessible,” he says. “While the subsidy helps poorer members to file disputes and increases the likelihood of winning a case, developing countries still lack the power to enforce WTO rulings due to their much greater trade policy flexibility relative to other WTO member groups, which substantially diminishes the economic incentive for low-income members to initiate a dispute.”
David Kuenzel, assistant professor of economics, is the co-author of a new paper published in the Canadian Journal of Economics titled “The Elusive Effects of Trade on Growth: Export Diversity and Economic Take-off.”
In the paper, Kuenzel and his co-author, Theo Eicher from the University of Washington, investigate whether the diversity of countries’ export portfolios affects their economic growth performance.
In the paper, Kuenzel and Eicher propose a structured approach to trade and growth determinants based on recent advances in international trade. The results show that export diversity serves as a crucial growth determinant for low-income countries, and the effect weakens with a country’s level of development.