This paper explores the trade effects of industrial policy (IP), focusing on the role of preferential trade agreements (PTAs). The analysis uses data on product-level bilateral trade, industrial policy announcements, and rules on subsidies in different PTAs. The introduction of a new IP measure in a destination market reduces export growth to that market by about 0.28 percent. However, exports from fellow members of PTAs are not adversely affected and may be positively affected if the agreements have deep disciplines on subsidies. These findings suggest that PTAs have a shielding effect against the trade distorting effects of industrial policies.
{"title":"Trade effects of industrial policies: Are preferential agreements a shield?","authors":"Alessandro Barattieri , Aaditya Mattoo , Daria Taglioni","doi":"10.1016/j.jpolmod.2025.06.015","DOIUrl":"10.1016/j.jpolmod.2025.06.015","url":null,"abstract":"<div><div>This paper explores the trade effects of industrial policy (IP), focusing on the role of preferential trade agreements (PTAs). The analysis uses data on product-level bilateral trade, industrial policy announcements, and rules on subsidies in different PTAs. The introduction of a new IP measure in a destination market reduces export growth to that market by about 0.28 percent. However, exports from fellow members of PTAs are not adversely affected and may be positively affected if the agreements have deep disciplines on subsidies. These findings suggest that PTAs have a shielding effect against the trade distorting effects of industrial policies.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 830-841"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863754","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.012
Lucjan T. Orlowski
This study determines the public debt-to-GDP levels for the United States to identify debt thresholds that support macroeconomic stability, with a focus on price stability and low unemployment. Unlike previous studies that analyze how debt impacts economic growth, this research looks at how inflation and unemployment react to the rising debt ratio at different levels of debt. The analysis starts by estimating the relationship between changes in public debt and changes in real GDP, noting a significant shift in 2008Q1 coinciding with the onset of the global financial crisis. Prior to the crisis, debt increases had no impact on GDP, but afterwards, an inverse relationship emerged. The analysis then proceeds with the sequence of two tests. Firstly, by conducting SETAR(2,p) testing on quarterly data from 1996 to 2024, two debt ratio thresholds are identified at 55.75 % and 97.12 %. This categorizes the debt ratio in three zones: a low debt zone below the lower threshold, a high zone above the upper threshold, and an intermediate zone in between. The tests examine the debt ratio in relation to changes in the core PCE annualized inflation, the rate of unemployment and the federal funds effective rate as a non-switching regressor. Subsequently, cointegration and VECM(2,5) tests are conducted to examine interactions and determine impulse responses between the debt ratio, inflation and unemployment in each debt zone. Findings indicate that increases in the debt ratio do not impact inflation or unemployment in the low debt zone. In the intermediate zone, rising debt leads to an increase in unemployment. Conversely, in the high debt zone, both inflation and unemployment increase significantly with rising debt. These non-linear and reverse causal relationships suggest that the current high public debt in the US is detrimental to macroeconomic stability, highlighting the need for urgent policies to reduce the debt burden.
{"title":"The impact of the Federal Government debt on macroeconomic stability in the United States","authors":"Lucjan T. Orlowski","doi":"10.1016/j.jpolmod.2025.06.012","DOIUrl":"10.1016/j.jpolmod.2025.06.012","url":null,"abstract":"<div><div>This study determines the public debt-to-GDP levels for the United States to identify debt thresholds that support macroeconomic<span> stability, with a focus on price stability and low unemployment. Unlike previous studies that analyze how debt impacts economic growth, this research looks at how inflation<span><span> and unemployment react to the rising debt ratio at different levels of debt. The analysis starts by estimating the relationship between changes in public debt and changes in real GDP, noting a significant shift in 2008Q1 coinciding with the onset of the global financial crisis. Prior to the crisis, debt increases had no impact on GDP, but afterwards, an inverse relationship emerged. The analysis then proceeds with the sequence of two tests. Firstly, by conducting SETAR(2,p) testing on quarterly data from 1996 to 2024, two debt ratio thresholds are identified at 55.75 % and 97.12 %. This categorizes the debt ratio in three zones: a low debt zone below the lower threshold, a high zone above the upper threshold, and an intermediate zone in between. The tests examine the debt ratio in relation to changes in the core PCE annualized inflation, the rate of unemployment and the federal funds effective rate as a non-switching regressor. Subsequently, </span>cointegration<span> and VECM(2,5) tests are conducted to examine interactions and determine impulse responses between the debt ratio, inflation and unemployment in each debt zone. Findings indicate that increases in the debt ratio do not impact inflation or unemployment in the low debt zone. In the intermediate zone, rising debt leads to an increase in unemployment. Conversely, in the high debt zone, both inflation and unemployment increase significantly with rising debt. These non-linear and reverse causal relationships suggest that the current high public debt in the US is detrimental to macroeconomic stability, highlighting the need for urgent policies to reduce the debt burden.</span></span></span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 771-784"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.017
Dominick Salvatore , Janhavi Shankar Tripathi
This paper studies the relationship between international trade and economic growth during the era of geoeconomic fragmentation (2017–2023), using a simultaneous equations model estimated through the full information maximum likelihood method. The study covers 132 countries (30 advanced and 102 developing) and also analyzes trade-growth dynamics separately for large and small economies. The findings confirm that trade remains a crucial factor for economic growth, but it acts more as a facilitator than a direct driver. In advanced countries, exports positively contribute to capital formation and growth, and industrialization contributes significantly to exports, while capital inflows have a negative effect on fixed capital formation. For developing countries, industrialization significantly boosts exports and in turn economic growth. The study highlights that the rise in protectionism and trade disruptions during the geoeconomic fragmentation period may weaken the positive impact of trade on growth. The results are validated through dynamic simulations, underscoring the need for strategic industrialization and trade partnerships to sustain growth in a fragmented global economy.
{"title":"International trade and economic growth in the era of geoeconomic fragmentation","authors":"Dominick Salvatore , Janhavi Shankar Tripathi","doi":"10.1016/j.jpolmod.2025.06.017","DOIUrl":"10.1016/j.jpolmod.2025.06.017","url":null,"abstract":"<div><div><span><span>This paper studies the relationship between international trade and economic growth during the era of geoeconomic fragmentation (2017–2023), using a </span>simultaneous equations model estimated through the full information maximum likelihood method. The study covers 132 countries (30 advanced and 102 developing) and also analyzes trade-growth dynamics separately for large and small economies. The findings confirm that trade remains a crucial factor for economic growth, but it acts more as a facilitator than a direct driver. In advanced countries, exports positively contribute to capital formation and growth, and industrialization contributes significantly to exports, while </span>capital inflows have a negative effect on fixed capital formation. For developing countries, industrialization significantly boosts exports and in turn economic growth. The study highlights that the rise in protectionism and trade disruptions during the geoeconomic fragmentation period may weaken the positive impact of trade on growth. The results are validated through dynamic simulations, underscoring the need for strategic industrialization and trade partnerships to sustain growth in a fragmented global economy.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 862-879"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863802","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.018
Fred Campano , Dominick Salvatore , Alberto Costantiello
{"title":"What happens in the global economy if the United States reduces its share of imports in GDP","authors":"Fred Campano , Dominick Salvatore , Alberto Costantiello","doi":"10.1016/j.jpolmod.2025.06.018","DOIUrl":"10.1016/j.jpolmod.2025.06.018","url":null,"abstract":"","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 880-887"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863803","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.016
Adam Jakubik , Lorenzo Rotunno , Alisha Saini
Artificial Intelligence (AI) has the potential to reshape countries’ comparative advantage and transform international trade patterns. In this paper, we model the effect of AI technologies on bilateral trade flows by introducing an AI shock to the production process and analyzing how this shock influences trade dynamics. We then empirically estimate the relationship between AI exposure and bilateral exports in recent years. Our findings reveal that AI has a significant positive correlation with trade: a one standard deviation increase in AI exposure is associated with a 31 percent rise in exports, on average. Additionally, we explore how this effect varies across trading partners, highlighting distinct patterns between advanced, emerging, and low-income economies.
{"title":"Foresee the unseen: Evaluating the impact of artificial intelligence on international trade","authors":"Adam Jakubik , Lorenzo Rotunno , Alisha Saini","doi":"10.1016/j.jpolmod.2025.06.016","DOIUrl":"10.1016/j.jpolmod.2025.06.016","url":null,"abstract":"<div><div>Artificial Intelligence (AI) has the potential to reshape countries’ comparative advantage and transform international trade patterns. In this paper, we model the effect of AI technologies on bilateral trade flows by introducing an AI shock to the production process and analyzing how this shock influences trade dynamics. We then empirically estimate the relationship between AI exposure and bilateral exports in recent years. Our findings reveal that AI has a significant positive correlation with trade: a one standard deviation increase in AI exposure is associated with a 31 percent rise in exports, on average. Additionally, we explore how this effect varies across trading partners, highlighting distinct patterns between advanced, emerging, and low-income economies.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 842-861"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863801","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.013
Robert B. Koopman , Marinos Tsigas
This paper evaluates the economic consequences of increasing US trade unilateralism through a CGE modeling approach focusing on three counterfactual scenarios: universal tariff retaliation, partial US-China de-escalation, and trade barriers combined with immigration restrictions. Using a GTAP framework with enhanced labor market detail, we find that full retaliation reduces US real GDP by 1.32 % and income by 2.77 %, with particularly severe impacts on export-oriented sectors. While selected bilateral accommodation provides modest relief, the combination of trade restrictions and labor deportation policies amplifies losses, reducing GDP by 3.83 % and income by 12.08 %. The results highlight the substantial costs of retreating from cooperative trade frameworks and the interconnections between trade and immigration policies. These findings suggest that preserving rules-based cooperation, enhancing multilateral institutions, and developing integrated labor-trade adjustment mechanisms are vital for maintaining economic resilience in an evolving global order. Keywords: trade policy, tariffs, CGE modeling, labor markets, economic integration
{"title":"US trade conflict: Potential economic implications for the US and the global economy","authors":"Robert B. Koopman , Marinos Tsigas","doi":"10.1016/j.jpolmod.2025.06.013","DOIUrl":"10.1016/j.jpolmod.2025.06.013","url":null,"abstract":"<div><div><span>This paper evaluates the economic consequences of increasing US trade unilateralism through a CGE modeling approach focusing on three counterfactual scenarios: universal tariff retaliation, partial US-China de-escalation, and trade barriers combined with immigration restrictions. Using a GTAP framework with enhanced </span>labor market<span> detail, we find that full retaliation reduces US real GDP by 1.32 % and income by 2.77 %, with particularly severe impacts on export-oriented sectors. While selected bilateral accommodation provides modest relief, the combination of trade restrictions and labor deportation policies amplifies losses, reducing GDP by 3.83 % and income by 12.08 %. The results highlight the substantial costs of retreating from cooperative trade frameworks and the interconnections between trade and immigration policies. These findings suggest that preserving rules-based cooperation, enhancing multilateral institutions, and developing integrated labor-trade adjustment mechanisms are vital for maintaining economic resilience in an evolving global order. Keywords: trade policy<span><span>, tariffs, CGE modeling, labor markets, </span>economic integration</span></span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 785-804"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863800","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.014
Julia Estefania-Flores , Davide Furceri , Jonathan D. Ostry , Federico Steinberg
This paper examines the macroeconomic and political determinants of non-tariff barriers to international trade based on a new index of such restrictions with broad country and time coverage. We employ a structured empirical approach that integrates multiple methodologies to identify which factors are the most robust correlates of trade reform (defined as meaningful changes in non-tariff barriers). We find that structural factors, both macroeconomic (especially inflation and export concentration) and political (especially democracy, corruption, political polarization and populism) emerge as robust correlates of changes in trade policy. Among these, political and institutional variables explain the largest share of nontariff barrier policy variation.
{"title":"What drives trade policy reform?","authors":"Julia Estefania-Flores , Davide Furceri , Jonathan D. Ostry , Federico Steinberg","doi":"10.1016/j.jpolmod.2025.06.014","DOIUrl":"10.1016/j.jpolmod.2025.06.014","url":null,"abstract":"<div><div>This paper examines the macroeconomic and political determinants of non-tariff barriers to international trade based on a new index of such restrictions with broad country and time coverage. We employ a structured empirical approach that integrates multiple methodologies to identify which factors are the most robust correlates of trade reform (defined as meaningful changes in non-tariff barriers). We find that structural factors, both macroeconomic (especially inflation and export concentration) and political (especially democracy, corruption, political polarization and populism) emerge as robust correlates of changes in trade policy. Among these, political and institutional variables explain the largest share of nontariff barrier policy variation.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 805-829"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863753","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01DOI: 10.1016/j.jpolmod.2025.06.007
Joseph E. Stiglitz
{"title":"Industrial policy and the new protectionism","authors":"Joseph E. Stiglitz","doi":"10.1016/j.jpolmod.2025.06.007","DOIUrl":"10.1016/j.jpolmod.2025.06.007","url":null,"abstract":"","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 708-722"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863793","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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