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The Economic Impact of Trump: Conclusions from an Impact Evaluation Analysis

Author

Listed:
  • Kaan Celebi

    (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))

  • Paul J.J. Welfens

    (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))

Abstract

The Trump Administration's economic policy represents a variety of government interventions designed to stimulate higher output growth as well as higher employment. However, the policy mix adopted in President Trump's economic policy was rather unusual since expansionary fiscal policy - including tax rate reductions - were combined with an aggressive trade policy; the latter concerned mainly China, but even OECD partner countries were affected and this - in an interdependency analysis - raises questions about negative repercussion effects on US economic performance. Here, in a statistical and empirical analysis, the Panel Data Approach - combined with LASSO methodology - is used to generate a synthetical counterfactual for the US economic performance so that one can evaluate what kind of impact Trump's economic policy can be observed on GDP, unemployment and trade, where Newey-West HAC variance-covariance estimators are used for inference analysis. New findings on the extent to which Trump's economic policy really raised the US economic performance indicators - in various fields - beyond "normal" economic dynamics are derived. Looking at 2017-2019, the comparison of US economic performance with that of a synthetical "twin country" (i.e. a US "doppelgänger" in the absence of Trumpian policies) is useful and suggests that the Trump Administration's performance is clearly less successful than the US President has claimed when arguing that the economic performance of the US under his leadership was exceptionally good. Trump's economic policy has undermined output growth and worsened the current account and the trade balance, respectively; gross fixed capital formation and the unemployment rate have better performed than predicted.

Suggested Citation

  • Kaan Celebi & Paul J.J. Welfens, 2020. "The Economic Impact of Trump: Conclusions from an Impact Evaluation Analysis," EIIW Discussion paper disbei281, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:eiiwdp:disbei281
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    References listed on IDEAS

    as
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    1. Werner Roeger & Paul J. J. Welfens, 2022. "The macroeconomic effects of import tariffs in a model with multinational firms and foreign direct investment," International Economics and Economic Policy, Springer, vol. 19(2), pages 245-266, May.

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    More about this item

    Keywords

    Trump; economic policy uncertainty; counterfactual; Panel Data Approach; LASSO;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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