|
on International Trade |
| By: | Jibran J. Punthakey (OECD) |
| Abstract: | Foreign direct investment (FDI) and trade are driving forces in agro-food global value chains (GVCs), allowing companies to spread their activities across countries in complex production chains. This study explores the landscape of FDI in the agriculture and food sectors, using a novel database of mergers and acquisitions (M&As) covering the period 1997 2017. The study finds that FDI plays an important role in driving participation in agro-food GVCs, underscoring the close interdependencies between FDI, trade, and the various other channels that multinational enterprises (MNEs) use to engage with GVCs. The results from a survey of agro-food MNEs suggest that FDI decisions are underpinned by a diverse range of strategic motivations that go beyond commercial considerations and market-related factors. In particular, open, transparent and predictable trade and investment policies can have a strong positive influence on agro-food FDI. The study also highlights the importance of a broader set of policy areas, including dynamic agricultural innovation systems, policies to support supply chain linkages, and strong and effective laws governing responsible business conduct. |
| Keywords: | Agriculture, FDI, GVCs, M&As, Mergers and Acquisitions, MNEs, Multinational Enterprises |
| JEL: | F21 F23 F60 Q17 Q18 |
| Date: | 2020–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:oec:agraaa:142-en&r=all |
| By: | Katharina Längle (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | This paper investigates the question which aspects of offshoring harm low skilled workers using data from the WIOD for 14 manufacturing industries in 16 high income countries between 1995 and 2008. By considering the use of foreign production factors in domestic production, the paper shows that low skilled workers are directly and negatively affected by offshoring of low skilled tasks. Importantly, the paper determines a further indirect channel highlighting the role of growing foreign competition in domestic markets for intermediate goods. Accordingly, wage shares of low skilled workers decline when competition in domestic downstream value chains increases. Interpreting this channel in the light of the literature on defensive skill-biased innovation, the shift in wage shares away from low skilled workers might be provoked by skill intensive investments in response to tougher foreign competition in domestic markets for intermediate goods. JEL classification: F23, L23, L24, M11. |
| Keywords: | Global value chains,Input-Output Tables and Analysis,Organization of Production,Empirical Studies of Trade |
| Date: | 2020–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02548691&r=all |
| By: | Kyle Handley; Fariha Kamal; Ryan Monarch |
| Abstract: | We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and they represent 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure. |
| Keywords: | Global supply chains; Tariffs; Trade war; U.S. exports |
| JEL: | F10 F13 F14 F23 H20 |
| Date: | 2020–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1270&r=all |
| By: | Katharina Längle (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | This paper investigates the question which aspects of offshoring harm low skilled workers using data from the WIOD for 14 manufacturing industries in 16 high income countries between 1995 and 2008. By considering the use of foreign production factors in domestic production, the paper shows that low skilled workers are directly and negatively affected by offshoring of low skilled tasks. Importantly, the paper determines a further indirect channel highlighting the role of growing foreign competition in domestic markets for intermediate goods. Accordingly, wage shares of low skilled workers decline when competition in domestic downstream value chains increases. Interpreting this channel in the light of the literature on defensive skill-biased innovation, the shift in wage shares away from low skilled workers might be provoked by skill intensive investments in response to tougher foreign competition in domestic markets for intermediate goods. JEL classification: F23, L23, L24, M11. |
| Keywords: | Global value chains,Input-Output Tables and Analysis,Organization of Production,Empirical Studies of Trade |
| Date: | 2020–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-02548691&r=all |
| By: | Katharina Längle (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne) |
| Abstract: | This paper investigates whether trade agreements help middle income countries to upgrade their product portfolio exported to high income countries.Combining product level trade flows from the CEPII-Baci database with information on product complexity from the Atlas of Economic Complexity and the DESTA database on trade agreements, this question is studied for a set of 135 countries between 2001 and 2013 based on a gravity framework. In this context, the development of the extensive and intensive margins for high complex products is considered as proxy for product upgrading. By exploiting the cross sectional dimension of the panel, this study finds that middle income countries export a wider product scope of complex goods if their trade relation is covered by an agreement including trade provisions related to competition , services and investments, compared to country pairs without an equivalent framework. Still, the consideration of the time dimension leads to ambiguous effect of these provisions. While positive estimation results for the intensive margin of complex goods are in line with related papers, negative effects on the extensive margin of complex goods are at odds with expectations of the mechanism between agreements and trade. JEL classification: F14, F15, F53. |
| Keywords: | Empirical Studies of Trade,Economic Complexity,Trade Integration |
| Date: | 2020–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02548689&r=all |
| By: | Sharat Ganapati; Woan Foong Wong; Oren Ziv |
| Abstract: | Entrepôts are hubs that facilitate trade between various origins and destinations. We study the role these hubs, and the networks they form, play in international trade. Using novel data, we trace the paths of containerized goods entering the United States. We show that the majority of trade is indirect and sent through a small number of entrepôts, resulting in lower transport costs through scale economies by using larger ships. We build a model of endogenous entrepôt formation incorporating route choice by exporters within a Ricardian setting. We use the model to estimate trade costs on each shipping leg and develop a geography-based instrument to estimate a leg-level scale elasticity. Counterfactuals opening the Arctic Passage and Brexit quantify the effects of both network spillovers and scale economies. We find that spillovers from the transportation network doubles baseline welfare gains, with scale economies further tripling them. |
| Keywords: | trade costs, scale, hubs, transport costs, transportation networks, international trade, shipping |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8199&r=all |
| By: | Nakamoto, Yasuhiro |
| Abstract: | Incorporating the homogeneous good sector into the Melitz model, we re-consider the �ndings in Demidova (2008, International Economic Review) that two countries have dif- ferent productivity distribution functions. Although the asymmetry of the productivity distribution function causes highly non-linear equations and incorporating the homoge- neous good sector yields the difference in markup rates between sectors, we graphically conclude that there are no multiple equilibria and no pure exporters, and that the ef- fects of trade liberalization on welfare are not qualitatively different from those in the one-sector Melitz model. Finally, supposing that trade specialization arises in the differ- entiated good sector, we con�rm the welfare impacts of trade liberalization. |
| Keywords: | Heterogeneous Firms, Country Asymmetries, Trade Liberalization, Welfare |
| JEL: | F1 F10 F13 |
| Date: | 2020–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99750&r=all |
| By: | Francois de Soyres; Alen Mulabdic; Michele Ruta |
| Abstract: | This paper presents a structural general equilibrium model to analyze the effects on trade, welfare, and gross domestic product of common transport infrastructure. The model builds on Caliendo and Parro (2015) to allow for changes in trade costs due to improvements in transportation infrastructure, financed through domestic taxation, connecting multiple countries. The model highlights the trade impact of infrastructure investments through cross-border input-output linkages. This framework is then used to quantify the impact of the Belt and Road Initiative. Using new estimates on the effects on trade costs of transport infrastructure related to the initiative, the model shows that gross domestic product will increase by up to 3.4 percent for participating countries and by up to 2.9 percent for the world. Because trade gains are not commensurate with projected investments, some countries may experience a negative welfare effect due to the high cost of the infrastructure. |
| Keywords: | Transportation infrastructure; Trade; Structural general equilibrium; Belt and road |
| JEL: | F10 F11 F14 |
| Date: | 2020–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1273&r=all |
| By: | Lorenzo Trimarchi |
| Abstract: | The recent backlash against free trade is partially motivated by the decline in manufacturing employment due to rising import competition from China. Previous studies about the “China syndrome” neglect the role of trade policy. This is surprising, given that politicians in high-income countries have extensively used antidumping (AD) measures to protect their economies from rising Chinese imports. In this paper, I estimate the causal effect of trade protection on imports and employment, by constructing a new instrument for AD measures based on industries’ importance in swing states and experience in filing AD petitions. I show that AD duties have reduced import competition, decreasing the annual growth rate of US imports from China by 0.40 percentage points on average. They have also helped contain the China syndrome, by increasing the annual growth rate of employment in protected industries by 0.07 percentage points. These results show that protectionist instruments allowed under GATT/WTO rules can be used to attenuate the effects of import competition on employment. |
| Keywords: | Antidumping; Import Competition; Manufacturing Jobs; US-China Trade Relations |
| JEL: | F13 F14 F16 J20 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/304888&r=all |
| By: | Barua, Suborna |
| Abstract: | The globalization of COVID-19 pandemic is en route to produce a chain of economic impacts worldwide through distortions in global trade and supply chain. The globalization of production and trade shocks in relation to China generate substantial threat to world trade. The aim of this paper is to provide a preliminary and broad-based understanding of likely trade implications of the pandemic. Beginning with an assessment on likely implications for trade between China and the rest of the world, the paper uses a standard trade analysis framework to explain the implications for world trade. The paper then presents a theoretical mapping that shows likely progression and span of trade implications and reviews emerging evidence to identify if real-life outcomes follow the map. The paper concludes that the pandemic is likely to not only introduce new patterns of world trade but also affect trade relations and globalization, making some economies winners and some losers. Given the scarcity of scholarly work on COVID-19’s trade implications, the paper contributes by offering a novel broad-based understanding, which could serve as a basis for advanced analysis. Assessments of the paper could help policy-makers in preparing for a new world order of international trade. |
| Keywords: | COVID-19, coronavirus, coronanomics, globalization, trade |
| JEL: | E6 F1 F13 F15 F2 F21 F5 |
| Date: | 2020–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99761&r=all |
| By: | Boris Fisera (Institute of Economic Studies, Faculty of Social Sciences, Charles University Opletalova 26, 110 00, Prague, Czech Republic; Slovak Academy of Science, Stefanikova 49, 814 38, Bratislava, Slovak Republic); Roman Horvath (Institute of Economic Studies, Faculty of Social Sciences, Charles University Opletalova 26, 110 00, Prague, Czech Republic) |
| Abstract: | We evaluate the effect of exchange rate misalignments on the balance of trade and the role that global value chain participation plays in this effect for 11 new European Union member states. Using heterogeneous panel cointegration methods, we first estimate the real equilibrium exchange rate and detect episodes of currency misalignment. We find asymmetric effects of real currency misalignments: overvaluation has a negative effect, but undervaluation has no effect on the trade balance. Additionally, we find that global value chain participation weakens the effect of currency misalignments on the balance of trade. Therefore, our results suggest that globalization reduces the role of exchange rates in stimulating the domestic economy. |
| Keywords: | Balance of trade, exchange rates, global value chains, export sophistication, panel cointegration |
| JEL: | F31 F32 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2020_10&r=all |
| By: | Ibrahim A. Adekunle (Ago-Iwoye, Olabisi Onabanjo University); Ayomide O. Ogunade (Ago-Iwoye, Olabisi Onabanjo University); Toluwanimi G. Kalejaiye (Ijebu-Ode, Tai Solarin University of Education); Adewale M. Balogun (Ago-Iwoye, Olabisi Onabanjo University) |
| Abstract: | Africa most populous black nations remain underdeveloped, mainly due to shambolic industrial sector performance. Rising problems of insecurity, corrupt practices, consumerism structure have made gains from capital inflows minimal. Little empirical credence has been leaned to the capital inflow-industrial output growth relationship in Nigeria. This anomaly has resulted in shortsighted policy formulation and attendant consequences.This paper examined international capital flows and industrial performance in Nigeria. The paper employed the two-step Engle and Granger estimation procedure and the Granger Causality to estimate parameters of the indices of industrial output growth and capital inflows to Nigeria. Findings revealed that labour participation, gross fixed capital formation, foreign direct investment (FDI) and portfolio investment have a significant positive relationship with industrial performance in Nigeria. Findings also revealed unidirectional causality from labour participation, gross fixed capital formation, foreign direct investment (FDI) and portfolio investmentto industrial performance in Nigeria. Based on the findings, the Nigerian government should create an enabling environment to attract more capital inflow that could augment domestic resources with the sole aim of growing the industrial sector. |
| Keywords: | Capital Inflow, Industrial Performance, Error Correction Modelling, Granger Causality, Nigeria |
| JEL: | C22 F21 P47 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:20/021&r=all |
| By: | Enkhbayar Shagdar (Economic Research Institute for Northeast Asia (ERINA)); Tomoyoshi Nakajima (Economic Research Institute for Northeast Asia (ERINA)) |
| Abstract: | Recent developments on the Korean Peninsula and worldwide may bring an end to the DPRK's isolation from the world economy. Employing the Global Trade Analysis Project (GTAP) Data Base and the standard GTAP Model (the Model), this paper analyzed the expected economic impacts to be brought by the DPRK's return to international society. However, as the DPRK is not a separate GTAP region, but is represented in the database as part of a composite region of the Rest of East Asia (XEA) along with Macao, the DPRK's data was generated using the SplitReg program, and the resulting data was used as the base data in the Model. The generated data indicated that the DPRK's GDP value was higher by about one-third than those commonly reported in the existing publicly available data. Upon generating the DPRK data, three economic revitalization and integration scenarios: (i) total factor productivity (TFP) growth in the DPRK; (ii) Korean Unification; and (iii) Northeast Asia free trade agreement (FTA), were considered in the analyses. The simulation results of assuming that the DPRK's total factor productivity would grow by 30% (60% of labor productivity growth of the ROK between 1963 and 1973) as a result of the country's return to international markets indicated that the DPRK would have a welfare gain of $6.6 billion associated mostly with the gains in technical change along with allocative efficiency improvements and terms-of-trade gains in investment and savings. The government services sector would be the largest beneficiary of these gains, followed by agriculture, extraction, heavy and light manufacturing sectors. Most of the other regions in the model would benefit from welfare gains as well, with the European Union (EU28), China and the U.S. being the largest beneficiaries mainly due to their gains in terms-of-trade in goods and services. The other two scenarios also resulted in welfare gains for the DRPK, but on smaller scales. As a result of the Korean Unification scenario, the DPRK would have a welfare gain of $1.7 billion, while it would be equal to $107 billion in the case of a free trade agreement in Northeast Asia. Contrary to the first scenario, most of these welfare gains were associated with the country's gains in terms of trade in goods and services. In terms of impacts on industry, all sectors will benefit from the TFP growth, while there will be winners and losers in the Korean Unification and Northeast Asia FTA scenarios. |
| Keywords: | CGE analysis, the DRPK's economy, Total Factor Productivity |
| JEL: | D58 O53 D24 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:eri:dpaper:2003&r=all |
| By: | Ingo Borchert (Department of Economics, University of Sussex, Falmer, United Kingdom); Paola Conconi (Université Libre de Bruxelles); Mattia Di Ubaldo (Department of Economics, University of Sussex, Falmer, United Kingdom); Cristina Herghelegiu (Université Libre de Bruxelles) |
| Abstract: | The European Union (EU) often conditions preferential access to its market upon compliance by its trading partners with Non-Trade Policy Objectives (NTPOs), including human rights and labor and environmental standards. We systematically document the coverage of NTPOs in EU trade agreements and in its Generalized System of Preferences (GSP). We then examine the extent to which trade agreements and GSP programs can be used to promote NTPOs. Preferential trade agreements are negotiated under multilateral rules, which require members to eliminate all tariffs reciprocally. As a result, once a trade agreement enters into force, the EU cannot easily restrict or extend access to its market so as to “punish bad behavior” or “reward good behavior” on NTPOs by its trading partners. By contrast, GSP preferences are granted on a unilateral basis, so they can be limited or extended, depending on compliance with NTPOs. EU GSP programs can thus provide a carrot-and-stick mechanism to promote NTPOs in partner countries. |
| Keywords: | Trade Agreements, GSP, Conditionality, Non-Trade Policy Objectives |
| JEL: | F13 F50 J80 K32 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:0920&r=all |
| By: | Ralph Ossa; Robert W. Staiger; Alan O. Sykes |
| Abstract: | International investment agreements employ dispute settlement procedures that differ markedly from their counterparts in trade agreements along three key dimensions: standing (i.e., the right to file grievances), the nature of the remedy, and the remedial period. In the state-to-state dispute settlement procedures of a typical trade agreement, only governments have standing, while private investors also have standing in the investor-state dispute settlement procedures employed by investment agreements. Trade agreements typically employ tariff retaliation as the remedy for violation of the agreement, while the award of cash damages is the norm in investment disputes. And trade agreements typically provide for only prospective remedies covering harm done subsequent to a ruling, while the damages awarded in investment disputes routinely cover past as well as future harms. We develop parallel models of trade agreements and investment agreements and employ them to study these differences. We argue that the differences can be understood as arising from the fundamentally different problems that trade and investment agreements are designed to solve. |
| JEL: | F02 F1 F23 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27012&r=all |
| By: | Wrobel, Ralph |
| Abstract: | It seems that the "globalization" has failed. Instead, a rising number of people in the Western world prefer old nationalist and protectionist policies. One reason may be the challenge by structural change. Main goal of this paper is to find out if any structural change and any spread of income in the Western World can be traced back to changing trade patterns. Obviously, there is a rising productivity gap between the export-oriented firms and the rest which leads to a rising gap in wages and opportunities for the workers. China is tending towards to trade more human-capital intensively produced goods. That leads to more vertical intra-industry trade with Western countries. While horizontal intra-industry trade brings positive economies of scale and a greater product variety for consumers, vertical intra-industry trade is responsible for more structural change. Especially, unskilled workers in the US and the EU are suffering while highly educated specialists get the gains of the structural change. Therefore, China's rising vertical intra-industry trade is responsible for - at least a part - of the sectoral changes in Western countries and the discrimination of less skilled workers. As a result, low-skilled workers in the Western countries worse off on a sustained basis. This may be one out of a lot of reasons to explain the rise of populism, nationalism and protectionism in current Western politics. |
| Keywords: | International trade,inter-industry and intra-industry trade,economic sectors,China,EU,USA |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:opodis:20201&r=all |
| By: | João Amador; Sónia Cabral; Birgitte Ringstad |
| Abstract: | The landscape of international traders is quite diverse. Firms can operate as exporters and importers, and also along the goods and services dimensions. Some firms strongly engage in several of these international trade flows, some firms only participate in one of them, while for other firms trade flows are just a small share of turnover. In this paper we suggest a taxonomy that classifies international traders in terms of the complexity of their participation in international trade. In addition, we study the linkages between different types of traders and build the network of their capital participations. The paper concludes that more complex international traders tend to be larger, younger, more productive and pay higher wages. However, their profitability is not clearly different from that of other traders. Moreover, evidence on capital linkages between types of traders suggests that minor traders do not compensate their low engagement in foreign markets through strong capital participations with other types of traders. Conversely, complex traders present strong capital linkages, thus adding two layers of complexity. Moreover, for more complex traders, the existence of many external capital participations is associated with labour productivity gains. |
| JEL: | F1 F14 L25 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w202004&r=all |
| By: | Arnoletto,Matias; Franco Bedoya,Sebastian; Reyes,Jose Daniel |
| Abstract: | This paper examines the performance of globally engaged firms in Argentina in the past decade. Using highly disaggregated firm-level customs transaction data for imports and exports, the paper documents the progressive retreat of Argentine firms from global markets. Between 2007 and 2017, the number of exporters decreased by 30 percent. Benchmarking the characteristics of these exporters with similar countries reveals that Argentine exporters are disproportionally fewer and individually larger, with export value extremely concentrated in a few firms. Firm churning rates are disproportionately low and survival rates of entrants are high. These findings reflect exceptionally high entry costs of export, which are the result of anti-export bias and import substitution policies that sought unsuccessfully to develop the local industry. The paper shows that exporters that import directly intermediate and capital goods have better export outcomes than other exporters. |
| Date: | 2020–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9218&r=all |
| By: | Dogan, Aydan (Bank of England); Hjortsoe, Ida (Bank of England) |
| Abstract: | This paper evaluates whether recent advances in modelling the extensive margin of exports contribute to our understanding of export fluctuations over the business cycle. Using US and euro-area data, we estimate a general equilibrium model in which the extensive margin of exports varies over the business cycle. A comparison of its performance to two similar models that differ in their modelling of the extensive margin of exports shows that, while recent advances in modelling the extensive margin of trade help replicate exports dynamics, this is not the result of a good fit to the observed extensive margin of exports: the model-implied extensive margin of exports varies considerably more than the data suggests. |
| Keywords: | Export dynamics; heterogeneous firms; extensive margin of trade; international business cycles |
| JEL: | E32 F41 F44 |
| Date: | 2020–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0859&r=all |
| By: | Konrad B. Burchardi (Institute for International Economic Studies); Thomas Chaney (Sciences Po); Tarek A. Hassan (Boston University, NBER, and CEPR); Lisa Tarquinio (Boston University); Steohen Terry (Boston University) |
| Abstract: | We show a causal impact of immigration on innovation and dynamism in US counties. To identify the causal impact of immigration, we use 130 years of detailed data on migrations from foreign countries to US counties to isolate quasi-random variation in the ancestry composition of US counties that results purely from the interaction of two historical forces: (i) changes over time in the relative attractiveness of different destinations within the US to the average migrant arriving at the time and (ii) the staggered timing of the arrival of migrants from different origin countries. We then use this plausibly exogenous variation in ancestry composition to predict the total number of migrants flowing into each US county in recent decades. We show four main results. First, immigration has a positive impact on innovation, measured by the patenting of local firms. Second, immigration has a positive impact on measures of local economic dynamism. Third, the positive impact of immigration on innovation percolates over space, but spatial spillovers quickly die out with distance. Fourth, the impact of immigration on innovation is stronger for more educated migrants. |
| Keywords: | migrations, innovation, patents, endogenous growth, dynamism |
| JEL: | J61 O31 O40 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-339&r=all |
| By: | Paul R. Bergin; Giancarlo Corsetti |
| Abstract: | In the wake of Brexit and the Trump tariff war, central banks have had to reconsider the role of monetary policy in managing the economic effects of tariff shocks, which may induce a slowdown while raising inflation. This paper studies the optimal monetary policy responses using a New Keynesian model that includes elements from the trade literature, including global value chains in production, firm dynamics, and comparative advantage between two traded sectors. We find that, in response to a symmetric tariff war, the optimal policy response is generally expansionary: central banks stabilize the output gap at the expense of further aggravating short-run inflation---contrary to the prescription of the standard Taylor rule. In response to a tariff imposed unilaterally by a trading partner, it is optimal to engineer currency depreciation up to offsetting the effects of tariffs on relative prices, without completely redressing the effects of the tariff on the broader set of macroeconomic aggregates. |
| JEL: | F4 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26995&r=all |
| By: | Douglas L. Campbell (New Economic School); Karsten Mau (Maastricht University) |
| Abstract: | Bloom, Draca, and Van Reenen (2016) find that Chinese competition induced a rise in patenting, IT adoption, and TFP by 30% of the total increase in Europe in the early 2000s. We find that the average patents per firm fell by 94% for the most Chinacompeting firms in their sample, but also by 94% for non-competing firms (starting from an initially higher level), and that various intuitive controls, such as controls for sectoral trends, renders the impact on patents-per-firm insignificant. We also find that while TFP appears to be positively correlated with the rise in Chinese competition, IV estimates are inconclusive, and other measures of productivity, such as value-added per worker and profits, are not correlated. Various instrumental and proxy variable approaches also do not support a positive impact of the rise of China on European patents. |
| Keywords: | Patents, China, Europe, Textiles, Trade Shocks, Manufacturing |
| JEL: | F14 F13 L25 L60 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:abo:neswpt:w0252&r=all |
| By: | Francois de Soyres; Alen Mulabdic; Siobhan Murray; Nadia Rocha; Michele Ruta |
| Abstract: | This paper studies the impact of transport infrastructure projects of the Belt and Road Initiative on shipment times and trade costs. Based on a new data on completed and planned Belt and Road transport projects, Geographic Information System analysis is used to estimate shipment times before and after the Belt and Road Initiative. Two sets of data are computed to address different research questions: a global database based on an analysis of 1,000 cities in 191 countries and 47 sectors and a regional database that focuses on more granular information (1,818 cities) for Belt and Road economies only. The paper uses sectoral estimates of “value of time” to transform changes in shipment times into changes in ad valorem trade costs at the country‐sector level. The findings show that the Belt and Road Initiative will significantly reduce shipment times and trade costs. For the world, the average reduction in shipment time will range between 1.2 and 2.5 percent, leading to reduction of aggregate trade costs between 1.1 and 2.2 percent. For Belt and Road economies, the change in shipment times and trade costs will range between 1.7 and 3.2 percent and 1.5 and 2.8 percent, respectively. Belt and Road economies located along the corridors where projects are built experience the largest gains. Shipment times along these corridors decline by up to 11.9 percent and trade costs by up to 10.2 percent. |
| Keywords: | Transport infrastructure; GIS analysis; Shipment times; Trade costs |
| JEL: | F14 F15 R41 |
| Date: | 2020–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1274&r=all |
| By: | David Cook; Nikhil Patel |
| Abstract: | Recent literature has highlighted that international trade is mostly priced in a few key vehicle currencies, and is increasingly dominated by intermediate goods and global value chains (GVCs). Taking these features into account, this paper reexamines the business cycle dynamics of international trade and its relationship with monetary policy and exchange rates. Using a three country dynamic stochastic general equilibrium (DSGE) framework, it finds key differences between the response of final goods and GVC trade to both internal and external shocks. In particular, the model shows that in response to a dollar appreciation triggered by a US interest rate increase, direct bilateral trade between non-US countries contracts more than global value chain oriented trade which feeds US final demand. We use granular data on GVC at the sector level to document empirical evidence in favor of this prediction. |
| Keywords: | dollar invoicing, exchange rates, monetary policy, global value chains |
| JEL: | E2 E5 E6 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:860&r=all |
| By: | Singh,J.P. |
| Abstract: | Cultural distance in this Brief refers to the gap between development narratives promoted from the developed world?from experts, policymakers, and international organizations?versus political-economy practices in the developing world. The cultural distance analyzed here focuses on paternalistic factors in advanced countries contributing to trade barriers facing developing countries. Gradual moves toward reciprocal rather than discriminatory preferential access, as well as export diversification, can benefit the developing world. |
| Keywords: | International Trade and Trade Rules,Food Security,Common Carriers Industry,Food&Beverage Industry,Business Cycles and Stabilization Policies,Pulp&Paper Industry,Plastics&Rubber Industry,Construction Industry,General Manufacturing,Textiles, Apparel&Leather Industry,Energy and Mining,Trade and Services |
| Date: | 2019–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbkrpb:142846&r=all |
| By: | Sangyup Choi (Yonsei University); Davide Furceri (IMF); Chansik Yoon (Princeton University) |
| Abstract: | While foreign direct investment (FDI) is known to be the most stable type of international capital flows, it may be particularly susceptible to heightened uncertainty because of its high fixed costs. We investigate the effect of domestic policy uncertainty on FDI inflows into 16 host countries using the OECD bilateral FDI panel dataset and the Economic Policy Uncertainty (EPU) index from 1985 to 2013. The bilateral structure of the data enables us to disentangle pull factors of FDI from its push factors, thereby obtaining a cleaner causal identification of the higher domestic policy uncertainty effect. To alleviate remaining endogeneity concerns, we use the timing of “exogenous” elections as an instrument. We find that domestic policy uncertainty in a host country robustly reduces the FDI inflows, with the effect being larger in countries with less financial development. |
| Keywords: | Economic policy uncertainty; FDI inflows; Elections; Financial development |
| JEL: | F21 F32 F42 |
| Date: | 2020–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2020_007&r=all |
| By: | Brada, Josef C.; Chen, Chunda; Jia, Jingyi; Kutan, Ali M. |
| Abstract: | Using event study methodology, we investigate whether bilateral investment protection treaties afford protection to foreign investors. Examining arbitral decisions for firms from six countries shows that firms that received awards from arbitrators gained in market value by as much as 3%. Per dollar awarded, firms gained over $20 in market value. Thus, we conclude that the system of arbitration does afford significant benefits to firms that can demonstrate that they have been injured by host governments who violated the terms of the relevant investor protection treaty. We also find some evidence that arbitral decisions are anticipated by stock markets. |
| JEL: | F23 G14 K12 K33 |
| Date: | 2020–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2020_010&r=all |
| By: | Molintas, Dominique Trual |
| Abstract: | All brouhaha on rice Tariffication renders sharp lessons for us Filipinos to rid ourselves of such pitiful state of social consciousness by ridiculing without right attitude—or aptitude on the subject. Sequentially, the incompetence of Media as a reliable source of critical information is inexcusable. Rice importation is the convenient option for Government to equal the demand for food, rather than developing the capacity of the small farmer or contending weather impossibilities. The dilemma in trade is that this causes price volatility; insofar it is not a reliable source because trade is utterly political. Trade is away capacity development of the smallhold farmers because trade denies self-sufficiency and curtails country food security. |
| Keywords: | Rice Tariffication, NFA, smallhold farmers, food security, self-sufficiency, capacity development, market monopoly, Republic Act 11203 |
| JEL: | F13 F6 F62 Q17 Q18 Q5 |
| Date: | 2019–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99884&r=all |
| By: | António Rua; Carlos Melo Gouveia; Nuno Lourenço |
| Abstract: | Along with the deepening of globalization and economic integration, economic agents face the challenge on how to extract useful information from large panels of data for forecasting purposes. Herein, we lay out a modelling strategy to explore the predictive content of large datasets for tourism forecasting. In particular, we assess the role of multi-country datasets to nowcast and forecast tourism by resorting to factor models with targeted predictors to cope with such a data-rich environment. Drawing on business and consumer surveys for Portugal and its main tourism source markets, we document the usefulness of factor models to forecast tourism exports up to several months ahead. Moreover, we find that forecast performance is enhanced if predictors are chosen before factors are estimated. |
| JEL: | C53 F47 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w202005&r=all |
| By: | Liza Archanskaia; Johannes Van Biesebroeck; Gerald Willmann |
| Abstract: | We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor literature, into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is that labor reallocation across tasks is subject to frictions, the importance of which varies by country. The arrival of capital-augmenting innovations triggers the movement of workers out of routine tasks, and countries with low labor market frictions become relatively abundant in non-routine labor. In the new equilibrium, more flexible countries specialize in producing goods that use non-routine labor more intensively. We document empirically that the ranking of countries with respect to the routine intensity of their exports is strongly related to labor market institutions and to cultural norms that influence adjustment to technological change, such as risk aversion or long-term orientation. The explanatory power of this mechanism for trade flows is especially strong for intra-EU trade. |
| Keywords: | comparative advantage, resource allocation, routine tasks |
| JEL: | F11 F14 F15 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8226&r=all |
| By: | Nady Rapelanoro; BALI Morad |
| Abstract: | This short paper’s goal is to create a sanction index to simulate international economic sanctions. To do so, it has been decided to focus on the Ukrainian crisis case, and on international sanctions against the Russian Federation. The first part of this paper treats the methodology and mathematical formalization used to build our index. After the mathematical formalization comes an empirical part that is demonstrating improvements brought by our work. To assess these improvements, our index is compared to a previously developed index from Kholodilin and Netšunajev (2016). Four country SVAR models are used in two main sections, two initials and two extended. Results of this section reveal that our new sanction index has a stronger explanatory power. In addition, it seems that our index affects short-term Russian production variations more sharply than its predecessor. The explanatory power improvements are confirmed by extended models, confirming our index relevance. |
| Keywords: | Russian economy, European economies, Ukrainian crisis, economic sanctions, sanctions shock, trade relations, international crisis, structural vector autoregressive models |
| JEL: | F4 C5 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2020-8&r=all |
| By: | Belke, Ansgar; Gros, Daniel |
| Abstract: | There is a symmetrical debate in two Euro area core countries: in France about the restrictive fiscal policy of Germany, leading to a huge external surplus, in Germany about the insufficient compliance with fiscal rules and the lack of structural reforms in France. What are the real causes of the divergence between the two economies? We show that different indicators of competitiveness yield very different results depending on the base period used, e.g. 1995 (peak of reunification boom), 1999 or 1990. A comparison with the preunification period shows little gain in competitiveness. We also find, somewhat surprisingly, that Germany's industry is not more integrated in international value chains than that of France or Italy. We then look at the link between export growth and export prices and argue that in the long run exports are not driven by competitiveness but by the increased supply of labor resulting from unification. In addition, we ask what drove 'wage moderation' in Germany: policy or the labor market. We finally analyse the longer-term trend in fiscal policy and the resulting distributional consequences in both countries. Our more general policy implication is that any analysis which compares today to the trough of German performance after unification risks over-estimating the potential of the country. Given that the 'internal unification' process is complete now, one should not expect the Germans to continue to outperform France as it has done over the last two decades. |
| Keywords: | France,Germany,international competitiveness,current account imbalances,wage moderation |
| JEL: | E62 F16 F41 F45 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:843&r=all |