nep-lam New Economics Papers
on Central and South America
Issue of 2005‒06‒14
three papers chosen by
Maximo Rossi
Universidad de la República

  1. Large Devaluations and the Real Exchange Rate By Burstein, Ariel Thomas; Eichenbaum, Martin; Rebelo, Sérgio
  2. Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization By Limão, Nuno; Olarreaga, Marcelo
  3. Who supports Free Trade in Latin America? By Eugene Beauliue; Ravi Yatawara; Wei Guo Wang

  1. By: Burstein, Ariel Thomas; Eichenbaum, Martin; Rebelo, Sérgio
    Abstract: In this Paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of non-tradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements.
    JEL: F31
    Date: 2004–12
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:4810&r=lam
  2. By: Limão, Nuno; Olarreaga, Marcelo
    Abstract: The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows down multilateral trade liberalization. Recent theoretical and empirical evidence indicates this is the case even for unilateral preferences that developed countries provide to small and poor countries but there is no estimate of the resulting welfare costs. To avoid this stumbling block effect we suggest replacing unilateral preferences by a fixed import subsidy. We argue that this scheme would reduce the drag of preferences on multilateral liberalization and generate a Pareto improvement. More importantly, we provide the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. By combining recent estimates of the stumbling block effect of preferences with data for 170 countries and over 5,000 products we calculate the welfare effects of the United States, European Union and Japan switching from unilateral preferences to Least Developed Countries to the import subsidy scheme. Even in a model with no dynamic gains to trade we find that the switch produces an annual net welfare gain for the 170 countries ($4,354 million) and for each group: the United States, European Union and Japan ($2,934 million), Least Developed Countries ($520 million) and the rest of the world ($900 million).
    Keywords: MFN tariff concessions; multilateral trade negotiations; preference erosion; preferential trade agreements
    JEL: D78 F13 F14 F15
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:5045&r=lam
  3. By: Eugene Beauliue (Univeristy of Calgary & International Trade Canada); Ravi Yatawara (University of Delaware); Wei Guo Wang (University of Calgary)
    Abstract: This paper examines individual trade policy preferences across the 17 countries in Latin America. The focus is on whether skilled or unskilled workers are more likely to support liberalized trade and on whether country characteristics, such as factor endowments, alter the preferences of skilled and unskilled workers. Based on the standard Heckscher-Ohlin model and the Stolper-Samuelson theorem, wage inequality in developing countries will decrease under free trade and unskilled workers will benefit. We find that on average skilled workers are more likely than unskilled workers to support free trade in Latin American countries. Separate country regressions reveal that this pattern is only statistically significant in 8 out of 17 Latin American countries. However, there are no countries in our sample in which unskilled workers are statistically more likely to support free trade than skilled workers. Not even in the lowest skill endowed country among our 17 Latin American countries. We also find that people from Latin American countries with higher GDP, faster growth, more cropland, and a longer period of time since reform were more likely on average to support free trade.
    Keywords: Trade policy; Latin America; Stolper-Samuelson theorem
    JEL: F1 F2
    Date: 2005–06–04
    URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0506002&r=lam

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