nep-opm New Economics Papers
on Open Economy Macroeconomics
Issue of 2017‒06‒04
six papers chosen by
Martin Berka
University of Auckland

  1. On the Geography of Global Value Chains By Pol Antràs; Alonso de Gortari
  2. How to neutralize the Dutch disease notwithstanding the natural resources curse By Pereira, Luiz C. Bresser
  3. Redistributive Fiscal Policies and Business Cycles in Emerging Economies By Michaud, Amanda M.; Rothert, Jacek
  4. The resource curse reloaded: revisiting the Dutch disease with economic complexity analysis By Camargo, Jhean Steffan Martines de; Gala, Paulo
  5. The Degree of Import Price Rigidity with Respect to Exchange Rate Fluctuations and Importing Firm Characteristics in Russian Economy By Pleskachev, Yury; Ponomarev, Yury
  6. Asymmetric Stabilizing Impact of International Reserves By Dongwon Lee; Kyungkeun Kim

  1. By: Pol Antràs; Alonso de Gortari
    Abstract: This paper develops a multi-stage general-equilibrium model of global value chains (GVCs) and studies the specialization of countries within GVCs in a world with barriers to international trade. With costly trade, the optimal location of production of a given stage in a GVC is not only a function of the marginal cost at which that stage can be produced in a given country, but is also shaped by the proximity of that location to the precedent and the subsequent desired locations of production. We show that, other things equal, it is optimal to locate relatively downstream stages of production in relatively central locations. We also develop and estimate a tractable, quantifiable version of our model that illustrates how changes in trade costs affect the extent to which various countries participate in domestic, regional or global value chains, and traces the real income consequences of these changes.
    JEL: C67 D21 D57 D58 F11 F14 F60
    Date: 2017–05
  2. By: Pereira, Luiz C. Bresser
    Abstract: This paper discusses two closely related concepts – the Dutch disease and the natural resource curse – and a third one, exchange rate populism, associated to the curse. The Dutch disease is a long-term overvaluation of the national currency that originates from the exports of commodities which originate Ricardian rents. The natural resource curse is the generalized rent-seeking that takes over a country that exports commodities. And exchange rate populism is a political practice of keeping the national currency overvalued, so to assure reelection to the politician. This paper shows that the curse and the populism will make difficult for a country to neutralize the Dutch disease, which blocks investment and growth, but argues that the fight against the natural resource curse and the exchange rate populism will be strengthened if the policymakers realize that there is a relatively simple policy that effectively neutralize the disease – a policy that was sketched almost ten years ago (Bresser-Pereira 2009), but remains hardly known by economists.
    Date: 2017–05–15
  3. By: Michaud, Amanda M. (Federal Reserve Bank of Cleveland); Rothert, Jacek (United States Naval Academy)
    Abstract: Government expenditures are pro-cyclical in emerging markets and counter-cyclical in developed economies. We show this pattern is driven by differences in social transfers. Transfers are more counter-cyclical and comprise a larger portion of spending in developed economies compared to emerging. In contrast, government expenditures on goods and services are quite similar across the two. In a small open economy model, we find disparate social transfer policies can account for more than a half of the excess volatility of consumption relative to output in emerging economies. We analyze how differences in tax policy and the nature of underlying inequality amplify or mitigate this result.
    Keywords: Fiscal Policy; Open Economy Macroeconomics; Emerging Markets; Business Cycles;
    JEL: E3 E6 F4
    Date: 2017–05–24
  4. By: Camargo, Jhean Steffan Martines de; Gala, Paulo
    Abstract: This paper shows that the Dutch disease can be more formally characterised as low economic complexity using ECI-type indicators; there is a solid and robust inverse relationship between exports concentrating on natural resources and economic complexity as measured by complexity indicators for a database of 122 countries from 1963 to 2013. In a large majority of cases, oil answers for shares in excess of 50% of exports. In addition to empirical panel analysis, we address case studies concerned with Indonesia and Nigeria and introduce a brief review of the theoretical literature on the topic. Indonesia is considered in the literature as a good example in avoiding the negative effects of the Dutch disease, whereas Nigeria is taken as a bad example in terms of institutions and policies adopted during the seventies and eighties. The empirical results show that complexity analysis and Big Data may offer significant contributions to the still-current debate surrounding the Dutch disease.
    Date: 2017–03–13
  5. By: Pleskachev, Yury (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Ponomarev, Yury (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The main purpose of the research study is assessment of the degree of import price rigidity with respect to exchange rate fluctuations and importing firm characteristics in Russian economy. Exchange rate pass-through in economy starts with the import prices. Empirical results show significant difference in import price rigidity depending on firms and goods characteristics. Using micro data on import to Russia from 2002 to 2015 allowed obtaining estimates that were not reported in the previous literature. This paper documents dependence of import price rigidity with respect to the exchange rate fluctuations form the degree of processing and firm characteristics. Import price rigidity is higher for manufactured products elaborately transformed, for goods, denominated in home currency, for goods with lower frequency of price changes and for the firms with higher market share. Empirical estimates based on micro data also allowed to document the dependence of import price rigidity from the economic sector and compare results with international literature.
    Date: 2017–03
  6. By: Dongwon Lee (Department of Economics, University of California Riverside); Kyungkeun Kim
    Keywords: Diminishing returns; Exchange rate volatility; Global financial crisis; International reserves
    JEL: F31 F33
    Date: 2017–05

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