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

Kaan Celebi and Paul Welfens

No disbei281, EIIW Discussion paper from Universitätsbibliothek Wuppertal, University Library

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.

Keywords: Trump; economic policy uncertainty; counterfactual; Panel Data Approach; LASSO (search for similar items in EconPapers)
JEL-codes: C23 C54 E65 F42 O47 (search for similar items in EconPapers)
Pages: 63 Pages
Date: 2020-10
New Economics Papers: this item is included in nep-mac
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