nep-int New Economics Papers
on International Trade
Issue of 2012‒04‒23
24 papers chosen by
Alessia A. Amighini
University Amedeo Avogadro

  1. Income distribution, product quality, and international trade By Fajgelbaum, Pablo; Grossman, Gene M.; Helpman, Elhanan
  2. Do Export Costs Matter in Determining Whether, When, and How Much African Firms Export? By Naude, Wim; Matthee, Marianne
  3. Spillover Effects of Exchange Rates: A Study of the Renminbi By Aaditya Mattoo; Prachi Mishra; Arvind Subramanian
  4. Trade and Inequality: From Theory to Estimation By Elhanan Helpman; Oleg Itskhoki; Marc-Andreas Muendler; Stephen J. Redding
  5. Intra-Firm Trade and Employment in US Manufacturing By Sotiris Blanas
  6. Measuring Commodity-Level Trade Costs in Asia: The Basis for Effective Trade Facilitation Policies in the Region By Hamanaka, Shintaro; Domingo, Romana
  7. North-South Trade, Unemployment and Growth: What’s the Role of Labor Unions? By Wolf-Heimo Grieben; Fuat Sener
  8. Foreign trade, home linkages and the spatial transmission of economic fluctuations in Italy By Valter Di Giacinto
  9. Bank Efficiency and Client Firms' Export Behavior: Evidence from firm-bank match-level data By INUI Tomohiko; MIYAKAWA Daisuke; SHOJI Keishi
  10. The location choices of multinational firms : the role of internationalization experience and group affiliation By Alexandre Gazaniol
  11. The Dynamics of Offshoring and Institutions By Heyman, Fredrik; Gustavsson Tingvall, Patrik
  12. Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills? By Macis, Mario; Schivardi, Fabiano
  13. International entrepreneurship and technological capabilities in the Middle East and North Africa By Brach, Juliane; Naudé, Wim
  14. How Does Uncertainty Affect the Choice of Trade Agreements? By Appelbaum, Ellie; Melatos, Mark
  15. Fire-Sale FDI? The impact of financial crises on foreign direct investment By Bogach, Olga; Noy, Ilan
  16. The Export Performance of Countries within Global Value Chains (GVCs) By Andrea Beltramello; Koen De Backer; Laurent Moussiegt
  17. The impact of exchange rate volatility on trade integration among North and South Mediterranean countries By Sabri, Nidal Rachid; Peeters, Marga; Abulaben, Diama K.
  18. The Global Welfare Impact of China: Trade Integration and Technological Change By Andrei A. Levchenko; Julian di Giovanni; Jing Zhang
  19. Trade in services. East Asian and Latin American Experiences By Nathalie Aminian; K.C. Fung; Alicia Garcia-Herrero; Francis NG
  20. Offshoring and labor income risk By Hogrefe, Jan; Yao, Yao
  21. Exchange Rate Volatility Under Peg: Do Trade Patterns Matter? By Constant Lonkeng Ngouana
  22. The impact of outward FDI on the domestic perimeter of manufacturing groups By Alexandre Gazaniol
  23. Can a home country benefit from FDI? A theoretical analysis By Chang, Chia-Ying
  24. Regional Cooperation towards Green Asia : Trade and Investment By Kaliappa Kalirajan,

  1. By: Fajgelbaum, Pablo; Grossman, Gene M.; Helpman, Elhanan
    Abstract: The authors develop a framework for studying trade in horizontally and vertically differentiated products. In their model, consumers with heterogeneous incomes and tastes purchase a homogeneous good and make a discrete choice of quality and variety of a differentiated product. The distribution of preferences generates a nested-logit demand structure such that the fraction of consumers who buy a higher-quality product rises with income. The model features a home-market effect that helps to explain why richer countries export higher-quality goods. It provides a tractable tool for studying the welfare consequences of trade and trade policy for different income groups in an economy.
    Keywords: Economic Theory&Research,Transport Economics Policy&Planning,Markets and Market Access,Transport and Trade Logistics,Common Carriers Industry
    Date: 2011–10–01
  2. By: Naude, Wim; Matthee, Marianne
    Abstract: What is the impact of export costs on the speed and extent to which African firms exports? We answer this question using a sample of 49,584 (mostly formal) firms across 71 countries, including 5,839 firms in 16 African countries surveyed by the World Bank during 2002 and 2003. We find that firms in African countries face higher export costs on average than firms in other parts of the world. However we find that African firms are more likely to enter export markets, but that when they do the extent of their exports (exports as a share of their total sales) is on average less than that of firms elsewhere. Also, younger firms are more likely to start exporting than older firms. As for the impact on export costs, we establish that the costs of exporting (as measured in US dollars) lower the likelihood and the extent of African firms’ exports but not when African firms start exporting.
    Keywords: international entrepreneurship , exports , transport costs , firm heterogeneity , Africa
    Date: 2012–02–21
  3. By: Aaditya Mattoo; Prachi Mishra; Arvind Subramanian
    Abstract: This paper estimates the impact of China’s exchange rate changes on exports of competitor countries in third markets, which we call the "spillover effect". We use recent theory to develop an identification strategy in which competition between China and its developing country competitors in specific products and destinations plays a key role. We exploit the variation - afforded by disaggregated trade data - across exporters, importers, product, and time to estimate this spillover effect. We find robust evidence of a statistically and quantitatively significant spillover effect. Our estimates suggest that a 10 percent appreciation of China’s real exchange rate boosts on average a developing country’s exports of a typical 4-digit HS product category to third markets by about 1.5-2 percent. The magnitude of the spillover effect varies systematically with product characteristics as implied by theory.
    Keywords: China , Competition , Developing countries , Exchange rate adjustments , Exchange rates , Exports , Spillovers ,
    Date: 2012–03–27
  4. By: Elhanan Helpman; Oleg Itskhoki; Marc-Andreas Muendler; Stephen J. Redding
    Abstract: While neoclassical theory emphasizes the impact of trade on wage inequality between occupations and sectors, more recent theories of firm heterogeneity point to the impact of trade on wage dispersion within occupations and sectors. Using linked employer-employee data for Brazil, we show that much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics; this within component is driven by wage dispersion between firms; and wage dispersion between firms is related to firm employment size and trade participation. We then extend the heterogenous-firm model of trade and inequality from Helpman, Itskhoki and Redding (2010) and structurally estimate it with Brazilian data. We show that the estimated model fits the data well, both in terms of key moments as well as in terms of the overall distributions of wages and employment, and find that international trade is important for this fit. In the estimated model, reductions in trade costs have a sizeable effect on wage inequality.
    JEL: E24 F12 F16
    Date: 2012–04
  5. By: Sotiris Blanas
    Abstract: This paper studies the impact of trade within US-headquartered multinational companies (MNCs) on labour demand for all employees, as well as, for those of high and low skill in US manufacturing for the period 1995 – 2005. We find strong evidence on the positive and negative effect of intra-firm exports and imports respectively, on aggregate employment. The former effect is stronger than the latter. Moreover, we find that demand for low-skilled labour is negatively associated with intra-firm imports, while unaffected by intra-firm exports. In contrast, high-skilled labour demand is positively linked to intra-firm exports but unaffected by intra-firm imports. The last two findings put together, suggest that low-skill intensive stages of the value-added chain are mostly transferred to the US affiliates abroad, while highskill intensive ones are mostly kept within the US parents
    Keywords: Multinational Companies (MNCs); intra-firm imports; intra-firm exports; employment; low-skilled workers; high-skilled workers
    JEL: F16 F23 J21 J23
    Date: 2012–03
  6. By: Hamanaka, Shintaro (Asian Development Bank); Domingo, Romana (Asian Development Bank)
    Abstract: As tariffs are increasingly being reduced, trade economists and policymakers have begun to emphasize the importance of reducing non-tariff trade costs to facilitate international trade flows. However, the measurement of trade costs and transport costs, in particular, is not an easy task. For developing country policymakers, it is important to accurately understand their country’s trade facilitation status (improvement as well as deterioration) at the commodity level, to be able to design appropriate trade facilitation policies. However, in reality, the majority of policymakers and researchers tend to overuse data from the World Bank’s Doing Business Report, despite the fact that data on costs to export and import under its trading-across-borders component have several inherent weaknesses. In this paper, we suggest that the use of trade statistics calculated in conjunction with Doing Business data is helpful in understanding overall as well as detailed commodity-level trade costs. The two can be regarded as alternative indicators of trade efficiency, because both indicators improve when the trade transaction is streamlined. Moreover, by using trade statistics, we can compute not only long-term trade costs but also trade costs for each commodity group, unlike the case of Doing Business data where the assumption of a standardized 20-foot, 10-ton dry cargo of a country’s leading export or import product is employed. Based on commodity-level trade costs, more concrete trade facilitation policies targeting specific sectors can be developed.
    Keywords: transport costs; commodity level; trade statistics; c.i.f.-f.o.b.; trade facilitation
    JEL: F13 F14 F15
    Date: 2012–04–01
  7. By: Wolf-Heimo Grieben (Department of Economics, University of Konstanz, Germany); Fuat Sener (Department of Economics, Union College, Schenectady, New York, USA)
    Abstract: We construct a North-South product-cycle model of trade with fully-endogenous growth in which both countries experience unemployment due to union wage bargaining. We find that unilateral Northern trade liberalization reduces growth and increases unemployment in both countries, while unilateral Southern trade liberalization has the opposite effects. We show that the existence of labor unions matters for trade liberalization to have any effect on Northern innovation and worldwide growth. For empirically plausible parameter values, bilateral trade liberalization by equal amounts increases growth and reduces unemployment in both countries. Stronger Northern labor unions hurt both countries by reducing growth and increasing unemployment. However, stronger Southern labor unions exert a positive growth effect for both countries, while decreasing Northern unemployment and increasing Southern unemployment.
    Keywords: trade liberalization, product cycle, endogenous growth, labor unions, unemployment
    JEL: F16 F43 J51 O31
    Date: 2012–03–31
  8. By: Valter Di Giacinto (Bank of Italy)
    Abstract: During the recent global recession both the export-oriented northern Italian regions and those in the far less open South experienced a sharp decline in economic activity. One of the possible explanations is the existence of strong domestic linkages propagating foreign demand shocks from North to South. To assess the scope of the spatial transmission of global and local disturbances across Italian regions, in this paper we specify and estimate a bivariate structural spatial VAR model featuring GDP and foreign exports as endogenous variables. A standard gravity equation approach is implemented to model unobserved domestic regional trade flows, while regional sales on foreign markets are related to global trade fluctuations and local shocks to competitiveness, broken down into a national and an idiosyncratic component. In line with expectations, strong domestic linkages are uncovered on the basis of model estimation results. The latter show that even less export-oriented Italian regions, although broadly unaffected on impact, may eventually experience a sharp output decline following a fall in global trade of the size observed in the recent recession.
    Keywords: panel VAR model, trade linkages, spatial econometrics
    JEL: C21 C33 F14
    Date: 2011–10
  9. By: INUI Tomohiko; MIYAKAWA Daisuke; SHOJI Keishi
    Abstract: This paper empirically studies the impact of banks' efficiency on their client firms' export behavior. Our empirical analysis shows that the marginal impact of the total factor productivity (TFP) of cash-flow constrained firms to the extensive margin of exports increases as the efficiency of top lender banks improves. This channel is important for initiating exports but is neither for sustaining the export status nor the intensive margin. It implies that the main role of banks is to help prominent firms cover the fixed cost associated with the start-up of exports. These results also imply that it is necessary to relate various firm dynamics to the detailed characteristics of the banks having relationships with the firms.
    Date: 2012–04
  10. By: Alexandre Gazaniol (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD)
    Abstract: (english) This paper investigates whether location choices of multinational firms depend on past export, import or FDI experience on foreign markets, and the experience of other affiliated firms. Using French data, we observe that 95% of new FDIs are preceded by exports in the same country, whereas 73% are preceded by imports. Regardless of locations’ observable and unobservable characteristics, we find that exporting in a given country, and to a smaller extent importing from it, significantly phase is more systematic for investing in distant countries and for first-time investors, whereas import experience is significantly correlated with FDI in low-income countries. Location choices not only depend on the investor’s own international experience, but also on the international experience of other affiliated firms: firms tend to invest in countries where the group already owns a local affiliate, and are more likely to invest in a distant country if other affiliated firms are already exporting there. These findings suggest the existence of coordinated strategies and/or information sharing between affiliated firms. _________________________________ (français) Cet article s’intéresse aux choix de localisation des firmes multinationales, et détermine dans quelle mesure ces choix dépendent de l’expérience internationale de l’investisseur et de celle de son groupe. A partir de données françaises, nous constatons que 95% des nouveaux investissements à l’étranger sont précédés d’exportations dans le même pays, tandis que 73% sont précédés d’importations. Indépendamment des caractéristiques observables et inobservables des pays, exporter vers un pays donné, et dans une moindre mesure en importer, accroît significativement la probabilité d’investir dans ce pays l’année suivante. La phase d’exportation est plus systématique pour les investissements dans des pays distants et pour les primo-investisseurs, tandis que l’expérience d’importation est significativement corrélée aux IDE dans les pays à bas revenu. Par ailleurs, les choix de localisation ne dépendent pas seulement de l’expérience internationale de l’investisseur, mais aussi de celle de son groupe : les firmes tendent à investir dans les pays où le groupe détient déjà une filiale locale, et sont plus enclines à investir dans des pays distants si d’autres sociétés affiliées y exportent déjà. Ces résultats suggèrent l’existence de stratégies coordonnées et/ou d’un partage d’informations entre sociétés affiliées.
    Keywords: Multinational firms, location choices, internationalization process, export, import,proximity / concentration trade-off.
    JEL: D22 F13 F20
    Date: 2012–04
  11. By: Heyman, Fredrik (Research Institute of Industrial Economics); Gustavsson Tingvall, Patrik (The Ratio Institute)
    Abstract: Previous research has recognized that weak institutions can hamper investments and alter patterns of trade. However, little is known about the impact of institutional quality on offshoring. This is surprising, given that offshoring has become an important part of many firms’ internationalization strategy. This study uses detailed Swedish firm-level data on production and trade in combination with a large set of institutional measures of the target economies to study the relationship between institutional quality and offshoring. The results suggest that weak institutions are negatively related to offshoring in general and to offshoring of R&D-intensive goods in particular. Furthermore, firms that are able to establish long-term contracts do so by starting small and successively deepening their engagements. These results are robust to a large number of conometric pecifications and various measures of institutional quality.
    Keywords: Offshoring; Institutions; Firm-level data
    JEL: F14 F23 P48
    Date: 2012–04–11
  12. By: Macis, Mario (Johns Hopkins University); Schivardi, Fabiano (University of Cagliari)
    Abstract: We use linked employer-employee data from Italy to explore the relationship between exports and wages. Our empirical strategy exploits the 1992 devaluation of the Italian Lira, which represented a large and unforeseen shock to Italian firms' incentives to export. The results indicate that the export wage premium is due to exporting firms both (1) paying a wage premium above what their workers would earn in the outside labor market – the "rent-sharing" effect, and (2) employing workers whose skills command a higher price after the devaluation – the "skill composition" effect. The latter effect only emerges once we allow for the value of individual skills to differ in the pre- and post-devaluation periods. In fact, using a fixed measure of skills, as typically done in the literature, we would attribute the wage increase only to rent sharing. We also document that the export wage premium is larger for workers with more export-related experience. This indicates that the devaluation increased the demand for skills more useful for exporting, driving their relative price up.
    Keywords: export wage premium, linked employer employee data, exports, wages, returns to skills, rent sharing
    JEL: F16 J31
    Date: 2012–04
  13. By: Brach, Juliane (University of Copenhagen and German Institute of Global and Area Studies, Hamburg); Naudé, Wim (UNU-MERIT/MGSoG, University of Maastricht)
    Abstract: In this paper we investigate the extent of international entrepreneurship in Algeria, Egypt, Morocco, Oman and Syria using a dataset covering 3,281 firms. We find that weak technological capabilities constrain internationalization. Firms with ISO accreditation, an own website, and those who have introduced new technology have a higher probability of entering export markets than otherwise. Firms in high-tech sectors are more likely to export early. However with foreign shareholding this advantage of high-tech firms disappears. The results suggest that early international entrepreneurs may need to pay more in informal payments if they want to increase the share of their exports once they have entered into export markets. We derive implications for policy and further research.
    Keywords: International entrepreneurship, exports, entrepreneurial capabilities, innovation, Middle East, North Africa, MENA
    JEL: L26 L25 M16 O55 F23
    Date: 2012
  14. By: Appelbaum, Ellie; Melatos, Mark
    Abstract: This paper analyzes how uncertainty and the timing of its resolution influence the formation and design of regional trade agreements. Two sources of uncertainty — in demand and costs — are considered. We compare the case in which uncertainty is resolved "early" (before tariffs are chosen), with the case in which uncertainty is resolved "late" (after tariffs are chosen). These cases are, in turn, compared with the benchmark case of no uncertainty. We demonstrate that, as long as some decisions are made after uncertainty is resolved, trade agreements have option values. These option values differ across agreements, reflecting members' different degrees of (trade policy) freedom to respond to changes in the trading environment. Moreover, these option values may be sufficiently large as to lead prospective members to opt for a more flexible trading arrangement (such as a free trade area) over a less flexible agreement (such as a customs union). Indeed, countries may even prefer to stand alone than join a free trade area under some circumstances. Finally, we show that the timing of the resolution of uncertainty can significantly impact the type of trade agreement that countries wish to form.
    Keywords: Resolution of Uncertainty; Uncertainty; Customs Union; Free Trade Area; Trade Agreement
    Date: 2012–04
  15. By: Bogach, Olga; Noy, Ilan
    Abstract: In this paper, we analyze the evolution of foreign direct investment (FDI) inflows to developing and emerging countries around financial crises. We empirically and thoroughly examine the Fire‐Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI. We distinguish between Mergers and Acquisitions (M&A) and Greenfield investment, as well as between different motivations for FDI—horizontal (tariff jumping) and vertical (integrating production stages). We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the value of horizontal and vertical FDI. We do not find empirical evidence of Fire‐Sale FDI. On the contrary, financial crises are shown to affect FDI flows and M&A activity adversely.
    Keywords: International investment, Foreign direct investment (FDI), Financial crises, Mergers and Acquisitions, Multinational firms,
    Date: 2012–03–30
  16. By: Andrea Beltramello; Koen De Backer; Laurent Moussiegt
    Abstract: The growing importance of global value chains (GVCs) in the international organisation of production increasingly challenges the traditional way of measuring countries’ export performance and hence international competitiveness. As a result of growing production fragmentation, a country’s export bundle nowadays incorporates imports of intermediate goods representing a (large) part of its value. In this case, simply looking at the evolution of exports may misrepresent the international competitive position of a country. This paper discusses the export performance of countries along the value chain by distinguishing upstream activities (i.e. the production of intermediate inputs) and more downstream activities (e.g. the final assembly of products). The empirical analysis first shows how imports of intermediates increasingly determine the export competitiveness of countries in final products. Second, the paper analyses the developments at the intensive and extensive margins of trade and studies how structural changes in terms of geographical and sectoral composition, largely outside the influence of national policies, have contributed to countries’ export performance.<BR>L'importance croissante des chaînes de valeur mondiales (CVM) dans l'organisation internationale de la production remet en question la façon traditionnelle de mesurer la performance à l’exportation et par conséquent la compétitivité internationale des pays. De nos jours, en raison de la fragmentation de la production, les exportations d'un pays intègrent des importations de biens intermédiaires qui représentent une partie (importante) de leur valeur. Dans ce cas, regarder exclusivement l'évolution des exportations peut biaiser la position concurrentielle internationale d'un pays. Ce document de travail examine la performance à l’exportation des pays au long des CVM, en distinguant les activités en amont (à savoir la production d'intrants) des activités en aval (par exemple l'assemblage final des produits). L'analyse empirique montre d'abord que les importations de biens intermédiaires déterminent de plus en plus la compétitivité des exportations des biens finaux des pays. Deuxièmement, le document de travail analyse les développements au niveau des marges intensive et extensive du commerce, et examine comment les changements structurels en termes de composition géographique et sectorielle des exportations, qui sont en grande partie hors de l'influence des politiques nationales, ont contribué à la performance à l’exportation des pays.
    Date: 2012–04–12
  17. By: Sabri, Nidal Rachid; Peeters, Marga; Abulaben, Diama K.
    Abstract: The volatility of exchange rates leads to a reduction of international trade volumes, especially in emerging economies including the South Mediterranean countries. This study discusses the impact of exchange rates on bilateral South- North trade flows, which comes timely after the increased volatility between the Euro and Arab national currencies during the last few years and after the global financial crisis of 2008 that led to a sharp reduction at that time. We investigate the impact of exchange rate volatility on trade using monthly time series for the last ten years from 2000 up to 2011. By means of a Vector Auto Regression model with eXogenous variables (VARX) we estimate the reactions of bilateral exports and imports in response to exchange rate fluctuations between South and North Mediterranean economies. A sample of three South Arab countries is selected including Egypt, Jordan, and Morocco. Causality tests are conducted to examine the hypotheses. Our results show that the exports of goods from Egypt to the European Union decreases in comparison with the baseline by about 3% in case of an appreciation of 10% of the Egyptian pound vis-à-vis the euro, while the imports of Egypt from the EU increase by almost 10%. Also for Morocco, the imports from the EU react much stronger than the exports to the EU to a similar size appreciation of the Moroccan dirham. Jordan is less import-dependent, though reacts strongly in terms of exports if its dollar-pegged currency appreciates vis-à-vis the euro. Finally, we can conclude that the actual exchange rate changes are quite high.
    Keywords: international finance; trade; integration; Mediterranean; volatility; econometric modeling; Vector Autoregressions
    JEL: F4 C3 P45 F3 O16
    Date: 2012–03–27
  18. By: Andrei A. Levchenko; Julian di Giovanni; Jing Zhang
    Abstract: This paper evaluates the global welfare impact of China’s trade integration and technological change in a quantitative Ricardian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity growth scenarios: a "balanced" one in which China’s productivity grows at the same rate in each sector, and an "unbalanced" one in which China’s comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson, 2004), the large majority of countries in the sample, including the developed ones, experience an order of magnitude larger welfare gains when China’s productivity growth is biased towards its comparative disadvantage sectors. We demonstrate both analytically and quantitatively that this finding is driven by the inherently multilateral nature of world trade. As a separate but related exercise we quantify the worldwide welfare gains from China’s trade integration.
    Keywords: Economic models , International trade , Production growth , Productivity , Trade integration , United States ,
    Date: 2012–03–19
  19. By: Nathalie Aminian; K.C. Fung; Alicia Garcia-Herrero; Francis NG
    Abstract: This paper investigates the trend and characteristics of trade in services in two fertile regions where different forms of trade integration have taken place: East Asia and Latin America. To that end, the World Bank data are utilized to categorize services trade in order to put on view the national and regional positions on dynamic sectors, and to compare East Asia and Latin America in terms of revealed comparative advantages, the weight of service activities in the regional economic activity, the share of services employment. The paper deals also with the issue of internationalization of services through FDI. Overall, it shows the increasing importance of East Asia as a trading region while the share of North & Latin America is low and declining over time.
    Keywords: Service trade, East Asia, Latin America, foreign direct investment
    JEL: F14 F15 O53 O54 O57
    Date: 2012–04
  20. By: Hogrefe, Jan; Yao, Yao
    Abstract: This paper analyzes the impact increased offshoring has on labor income risk. It is therefore distinct from a large number of studies explaining the level effects of globalization on the labor market in that it takes a look at effects on second moments, i.e. the variance of incomes. It provides an assessment that directly connects labor income risk and offshoring trends at the sector level. Importantly, we distinguish between transitory and permanent shocks to individual income. Permanent income risk is defined as variance of shocks to income that do not fade out over time and are assumed to be not self-insurable. It thus has a particular relevance for individual welfare. Our findings suggest that offshoring tends to lower permanent income risk. This effect is particularly strong for offshoring to low-income destinations. Hence, there could be potential welfare gains when domestic firms increasingly offshore production to foreign countries. --
    Keywords: trade,offshoring,wages,labor income risk
    JEL: F16 F23 E24
    Date: 2012
  21. By: Constant Lonkeng Ngouana
    Abstract: This paper assesses the role of trade patterns in shaping the volatility of the effective exchange rate under two alternative peg regimes: a hard peg to a single currency and a peg to a basket of currencies. I link the changes in the nominal effective exchange rate of a pegged currency to the fluctuations of its anchor vis-a-vis other major currencies, with an emphasis on the dynamics of trade patterns. In an application to the WAEMU (West African Economic and Monetary Union), I find that the nominal effective exchange rate of the union was twice as volatile under the hard peg to the euro as it would have been under a hypothetical basket peg over the past decade. This result was driven by the substantial shifts that occurred in WAEMU trade patterns, away from euro area countries and toward the Â"BICs" (Brazil, India, and China). These findings suggest that policymakers should pay as much attention to the type of peg as to pegging in itself, with a particular focus on the dynamics of trade patterns.
    Keywords: Currency pegs , Exchange rates , Trade , West African Economic and Monetary Union ,
    Date: 2012–03–09
  22. By: Alexandre Gazaniol (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD)
    Abstract: (english) This article aims to analyze the structure and the performance of multinational firms at the group level, and to estimate the impact of outward FDI on the domestic perimeter of manufacturing groups. This empirical work anticipates a major reshape of business statistics, which does not consider Legal Entities (LEs) as the relevant unit for economic analysis. In order to construct new statistical units which enjoy some degrees of autonomy, we use a French dataset (“LiFi”) which allows gathering all French LEs which belong to the same group. We show that nearly all multinational firms in the French manufacturing sector are organized around several LEs and we describe the implications of this organizational choice in terms of market structure and performance. Following firms which invest abroad for the first time reveals that outward FDI has a positive effect on the whole domestic perimeter of groups, since value-added, employment and exports significantly increase ex-post. The growth of employment is especially high in companies dedicated to auxiliary functions so the share of employees in the manufacturing perimeter tends to decrease after the investment. _________________________________ (français) Cet article vise à analyser la structure et les performances des firmes multinationales au niveau des groupes de sociétés, et à estimer l’impact des IDE sortants sur le périmètre domestique des groupes industriels. Il s’inscrit dans une refonte des statistiques d’entreprises, qui vise à dépasser le niveau des entités juridiques pour adopter une définition économique de l’entreprise, tenant compte de son degré d’autonomie. Afin de construire de nouvelles unités statistiques jouissant d’une autonomie de décision, nous utilisons l’enquête LiFi, qui nous permet de rassembler les sociétés françaises appartenant à un même groupe. Nous montrons que presque toutes les firmes multinationales dans l’industrie manufacturière française s’organisent autour de plusieurs entités juridiques et nous décrivons les implications de ce choix organisationnel en termes de structure de marché et de performances. L’analyse en dynamique des firmes qui investissent à l’étranger pour la première fois révèle que les IDE sortants ont un impact positif sur l’ensemble du périmètre domestique des groupes, dont la valeur ajoutée, l’emploi et les exportations augmentent significativement ex-post. La croissance de l’emploi apparaît plus soutenue dans les sociétés dédiées aux fonctions en support de la production, ce qui suggère que les IDE sortants contribuent à la désindustrialisation des pays développés.
    Keywords: Multinational firms, business groups, profiling, FDI, relocations, firms performance, deindustrialization, skill upgrading.
    JEL: D22 F23 L22
    Date: 2012–04
  23. By: Chang, Chia-Ying
    Abstract: The effects of outward FDI on home country’s growth remain an open question. The growth of outward FDI has renewed this attention. By allowing for endogenous decisions of firms on both whether to conduct FDI and whether to flow capital returns back to the home country, we have found several interesting results. First, as long as the probability of conducting FDI is positive, a higher proportion of entrepreneurs may harm economic growth of the home country in short-run and long-run. The ambiguous effects of transaction costs and MRS between domestic and foreign consumption on the home country’s economic growth result from the role of financial intermediaries. If the effect via inflow probability dominates, conducting FDI in a host country with a more liberalized capital account, or with a higher capital return rate may promote the home country’s economic growth rate. This is consistent with the findings in the outward FDI in European Union since 1970s.
    Keywords: outward FDI, economic growth, capital returns, financial intermediaries,
    Date: 2012–03–19
  24. By: Kaliappa Kalirajan, (Asian Development Bank Institute (ADBI))
    Abstract: It is logical to argue that growth led by low-carbon goods and services (LCGS) is an imperative for the countries of Asia and the Pacific, and particularly for emerging Asian economies, which are heavily dependent on imported energy and resources. Acknowledging this fact, individual governments in Asia have recently been taking effective actions in the form of voluntary targets and policy commitments to improve the production and use of LCGS. However, the observed effects of these commitments are often challenged by many constraints, such as technological barriers, financial deficiencies, and lack of human capital, some of which are very specific to developing Asia. Different sector policies—such as in trade and environment—and investment policies that aim to facilitate private enterprises, households, and government agencies to contribute to green growth through the use of LCGS are being implemented at the national level. However, fears of competitive disadvantage mean that these policies need to be driven by global and regional frameworks that encompass all countries and sectors. In this context, the objectives of this study are to (i) measure the potential of major emerging Asian economies for exports in LCGS under the "grand coalition," partial coalition, and stand-alone scenarios; (ii) measure the impact of existing "behind the border" constraints on potential exports in emerging Asian economies; (iii) identify the potential, options, and challenges with respect to a grand coalition scenario; and (iv) find ways to improve the contribution of public–private partnerships to LCGS.
    Keywords: Green Asia, low-carbon goods and services (LCGS), Asia and the Pacific, the production and use of LCGS
    JEL: Q56 Q58 R11
    Date: 2012–04

This nep-int issue is ©2012 by Alessia A. Amighini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.