(Draft coming soon)

Slides

Media Briefing

Abstract: This paper introduces the Trade Policy Activity (TPA) Index, a novel indicator measuring evolving global trade policy dynamics since the Global Financial Crisis. Using a Dynamic Factor Model on comprehensive trade policy data covering 197 countries and territories, we document a structural shift around 2019 with a substantial expansion in the use of trade policies. The TPA Index also identifies cyclical episodes of heightened activity and reveals interconnections between different types of measures. We are also able to identify systematic differences in trade policy deployment among groups of economies. Additionally, we employ MIDAS (Mixed Data Sampling) regressions with high-frequency data to develop nowcasting capabilities for trade policy activity, enabling realtime identification of potential policy shifts. These results contribute to the trade policy measurement literature and offer a tool for monitoring global trade policy developments in real time. 

Abstract: This paper investigates the implications of trade policy uncertainty (TPU) in the United States for current account balance (CAB) dynamics, given renewed interest in pursuing trade policy measures to address persistent current account deficits. We examine whether TPU, a distinct source of policy uncertainty and separate from enacted tariff and non-tariff measures, can influence aggregate macroeconmic outcomes. Using a local projection framework that controls for domestic and global macroeconomic factors and enacted trade policy changes, we find that TPU shocks generate a statistically significant but transitory positive effect on the CAB, primarily through a sharper contraction in imports relative to exports, with durable goods relatively more affected. From a savings and investment perspective, TPU raises precautionary savings in the private sector and modestly depresses investment. This is primarily driven by government investment and partially offset by private investment, particularly in high-tech sectors. Bilateral trade effects are heterogenous across different groups of trading partners: geopolitical distance and closer GVC and FDI linkages imply larger declines. Our findings suggest that while TPU can momentarily shift external balances, it does not deliver sustained improvements, highlighting the importance of transparent and predictable trade policy frameworks that mitigate costly uncertainty and avoid unintended macroeconomic distortions. Our findings also imply that econometric analyses of the CAB effects of trade policy should control for uncertainty in order to avoid spurious correlations.