How Have Wisconsin Goods Exports Fared since 2018

I’m giving a presentation on what determines Wisconsin exports. Here’s an interesting finding – since 2018, real goods exports have underperformed what would’ve been expected based on rest-of-world GDP and the real value of the US dollar.

Here’s Wisconsin goods exports (from BEA) deflated into real terms using the BLS export price index for all commodities, plotted with the index of real rest-of-world trade-weighted GDP.

Figure 1: Goods exports of Wisconsin in bn 2000$, SAAR (blue, left log scale), and real rest-of-world GDP, 2005=100 (brown, right log scale). NBER defined peak-to-trough recession dates shaded gray. Source: BEA/Census, BLS both via FRED, Dallas Fed DGEI, NBER, and author’s calculations. 

I use an error correction model involving exports, rest-of-world GDP, and the real exchange rate, estimated 1996-2017. The long run elasticity of Wisconsin goods exports to rest-of-world GDP is about 1.1, the elasticity with respect to the exchange rate of about 0.40. I use this equation to dynamically forecast 2018Q1-onward, and obtain this (note: units are in millions, monthly rate):

Figure 2: Goods exports of Wisconsin in mn 2000$, seasonally adjusted (black, log scale), and dynamic forecast from ECM (blue), +/- 1 standard error confidence interval (gray lines). NBER defined peak-to-trough recession dates shaded gray. Source: BEA/Census, BLS both via FRED, NBER, and author’s calculations. 

The increasingly large forecast errors are associated with the beginning of the trade war. In other words, the historical correlations obtaining up to 2017 implied continued — albeit slow — growth in real exports through 2019, consistent with growth in the world economy, and a strong dollar.

Quantitative importance? Over the two years of the trade war preceding the onset of covid-19, the forecast errors average about $1 billion (in 2000$). With 2021 real exports at about 14.6 billion 2000$, that’s on the order of a 0.7% reduction.

The forecast error could be attributed to model misspecification, or the influence of other important determinants that were omitted from this three variable specification (the adjusted R2 is about 36%). It’s always hazardous to argue on the basis of residuals, but at first glance, given what we know about retaliation levied by our trading partners against swing state, the trade war and retaliatory actions seems not an implausible source of the forecast error.

So (once again), thanks Trump!

 

 

10 thoughts on “How Have Wisconsin Goods Exports Fared since 2018”

  2. Moses Herzog

    At least the Orange Abomination finished the southern border wall and it has now stopped ALL of the inflow of illegal immigrants. Damn, you liberals just can’t stand it when Republicans keep their promises and get the job done using free market solutions can you?? Not to mention all the money the Mexican government kicked in to pay for the wall. The wall is perfect. And everyone knows the wall perfect. You now the wall is perfect. Why can’t you and Raffensperger let the truth out Menzie?? Bruce Hall nailed you on this issue. He totally nailed you on it/

    https://www.cnn.com/2022/06/03/politics/steve-bannon-new-york-grand-jury-build-the-wall/index.html

  3. Moses Herzog

    Amazingly this summer heat hasn’t got me in a bad mood tonight. My mind works weird though. Thinking of playing word association with Menzie tonight (let’s see if he takes the bait kids).

    OK Menzie, word association game: I want you to put all former U.S. Presidents out of your mind. The category is “Incredibly annoying People”. I say to you the word “Don”. What is the next surname that enters your mind?? (Remember the word association topic, single initials are acceptable here)

  4. Moses Herzog

    Oooooohh!!!!! The crowd groans in disappointment. Doesn’t look like he’s gonna go for it kids, doesn’t look like he’s gonna go for it. We’ll try it again in the future sometime. Hope reigns eternal.

  5. CoRev

    Menzie, is there a list of effected products? Are they all or mostly affected by the trade war?

  6. James

    Thanks Menzie for the follow up – everything that Trump Admin did is a combination of B.S. and corruption (https://www.msnbc.com/opinion/msnbc-opinion/jared-kushner-s-deal-saudi-arabia-sure-looks-corrupt-n1294342a) – and the Trump Trade Deals to make America great again? No – just more Trump B,S, https://www.politico.com/news/2021/02/05/2020-trade-figures-trump-failure-deficit-466116

    If anyone still thinks Trump is a great deal maker – job creator – we do have a very expensive WI taxpayer financed weed field/boondoggle – we can offer them: https://www.nasdaq.com/articles/wisconsin-town-desperately-seeking-tenant-for-foxconn-plant

    1. Moses Herzog

      So many cheap degenerate jokes here, so little time. Notice how Miss He says (that would be pronounced with a “short u” sound, like in the word “hut” for those of you obsessed with using biologically incorrect pronouns that actually probably don’t care). Live, still breathing pigs and wheat to induce a housing purchase. They will also slaughter the pig if customers request (Although I’m not sure if they are forced to watch right before they eat it as I had to at some lamb soup restaurants in China~~the screaming of the animals really gets you salivating about 20 minutes before you eat it. If a screaming lamb on the porch of a restaurant doesn’t do it for you, I don’t know what to tell you…… but I digress.

      Folks, notice how journalist Miss He says:
      ” The campaign has been widely reported in Chinese media, and was trending on social media.”

      Then…….. Miss He (I’m certain accurately, no sarcasm) says: “Central China Real Estate did not respond to a request for comment, and deleted its wheat ad from WeChat on Wednesday.”

      So, shall I explain to our small contingent of nitwits here, among Menzie’s and Prof Hamilton’s predominantly intelligent audience the subtext here?? I’ll type it s-l-o-w-l-y f-o-r y-o-u…….. Central China Real Estate was not embarrassed about this until the foreign (in this case not a white devil, thank goodness) journalist phoned them to ask them about the practice/gimmick. Then after the foreign journalist asked, they took it off the website.

      I’m not going to spell this part of it out for you, use your imagination to figure out what this tells you about a certain nation’s psyche, i.e self-esteem. Getting anything there?? Stretch your antenna out superhard now…….

      1. Barkley Rosser

        Moses,

        You are right that “He” is pronounced as you describe it. It is a farily common Cantonese family name. I happen to have good relations with a Chinese economist who has that last name. He is on the executive committee that I chair of the Nonlinear Economic Dynamics Society. One of the two times I was in Guangzhou it was for a conference he organized there.

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