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Working Paper
Artificial Intelligence Methods for Evaluating Global Trade Flows
International trade policies remain in the spotlight given the recent rethink on the benefits of globalization by major economies. Since trade critically affects employment, production, prices and wages, understanding and predicting future patterns of trade is a high-priority for decision making within and across countries. While traditional economic models aim to be reliable predictors, we consider the possibility that Artificial Intelligence (AI) techniques allow for better predictions and associations to inform policy decisions. Moreover, we outline contextual AI methods to decipher trade ...
Working Paper
Introducing Trimmed Imports and Exports
Trade flows are volatile and notoriously difficult to predict. This paper introduces trimmed import and export growth rates for the United States to help improve trade forecasts. We calculate the growth rates as a trimmed mean that strips out subcomponents with less predictive power. By separating the signal from the noise, our trimmed growth rates provide a better perspective on where aggregate imports or exports are heading, particularly at horizons four to 12 months ahead. Consequently, out-of-sample forecasts based on our trimmed growth rates reduce forecast errors by up to 15 percent ...
Working Paper
Trade and Terrorism: A Disaggregated Approach
This paper constructs a model of trade consequences of terrorism, where firms in trading nations face different costs arising from domestic and transnational terrorism. Using dyadic dataset in a gravity model, we test terrorism?s effects on overall trade, exports, and imports, while allowing for disaggregation by primary commodities and manufacturing goods. While terrorism has little or no influence on trade of primary products, terrorism reduces trade of manufactured goods. This novel finding pinpoints the avenue by which terrorism harms trade and suggests why previous studies that looked at ...