nep-opm New Economics Papers
on Open Economy Macroeconomics
Issue of 2023‒04‒10
four papers chosen by
Martin Berka
Massey University

  1. International Sanctions and Dollar Dominance By Javier Bianchi; César Sosa-Padilla
  2. Active driver or passive victim: On the role of international monetary policy transmission By Camehl, Annika; von Schweinitz, Gregor
  3. BEMGIE: Belgian Economy in a Macro General and International Equilibrium model By Gregory de Walque; Thomas Lejeune; Ansgar Rannenberg; Magne Mogstad
  4. Globalization, Productivity Growth, and Labor Compensation By Dreger, Christian; Fourné, Marius; Holtemöller, Oliver

  1. By: Javier Bianchi; César Sosa-Padilla
    Abstract: This paper investigates the implications of international financial sanctions for the reserve currency status of the US dollar. We propose a simple model of a reserve currency, demonstrate how the anticipation of financial sanctions can weaken the dollar’s status, and evaluate the welfare implications.
    JEL: E42 F31 F32 F34 F41 P48
    Date: 2023–03
  2. By: Camehl, Annika; von Schweinitz, Gregor
    Abstract: We provide new insights into determinants of international interest rates spillovers across seven advanced economies. To disentangle and quantify their respective importance, we identify country-specific structural monetary policy, demand, and supply equations in a Bayesian structural panel vector autoregressive model. We formulate prior beliefs on magnitudes and signs of contemporaneous structural coefficients (i.e., (semi-)elasticities), based on a standard theoretical multi-country open economy model from the literature. Our findings show that interest rate spillovers occur via an aggregated demand channel. Unexpected monetary tightening causes modest declines in most foreign interest rates, while demand and supply shocks result in increased foreign interest rates. Our results support that central banks respond to changes in the domestic macroeconomic environment induced by domestic or foreign shocks rather than directly reacting to foreign shocks. Spillovers are quantitatively stronger for shocks originating in economically large areas with strong trade linkages.
    Keywords: informative priors, panel vector autoregressions, spillovers, structural vector autoregressions
    JEL: C11 C30 E52 F42
    Date: 2023
  3. By: Gregory de Walque (Economics and Research Department, National Bank of Belgium); Thomas Lejeune (Economics and Research Department, National Bank of Belgium); Ansgar Rannenberg (Economics and Research Department, National Bank of Belgium); Magne Mogstad (Economics and Research Department, National Bank of Belgium)
    Abstract: This paper outlines the three-country New Keynesian Dynamic Stochastic General Equilibrium model of the National Bank of Belgium. The model is named BEMGIE for Belgian Economy in a Macro General and International Equilibrium model. It features imperfect market competition, standard real and nominal rigidities, local currency pricing, energy in consumption and oil and foreign inputs in production. The model is estimated using Bayesian econometric techniques on Belgian, euro area and US data. BEMGIE is designed to provide quantitative simulations of macroeconomic shocks and policies, and to be used in the context of the Eurosystem projection exercises.
    Keywords: production networks, endogenous formation, fixed costsDSGE model, Open economy model, Multi-country model, International spillovers, Monetary policy, Exchange rate pass-through, Bayesian estimation.
    JEL: E10 E17 E30 E40 E52 F41 F45 F47 C11 C32 C51
    Date: 2023–03
  4. By: Dreger, Christian (DIW Berlin); Fourné, Marius (IWH Halle); Holtemöller, Oliver (IWH Halle)
    Abstract: We analyse how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leave-out measure for international trade integration for country-industry pairs using international input-output tables. First, we corroborate on the country-industry level that international trade integration increases productivity. Second, we show that international trade integration is associated with higher labour shares in advanced countries but with lower labour shares in manufacturing industries in emerging markets. Finally, we briefly discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises.
    Keywords: global value chains, income distribution, globalization, labor share, productivity
    JEL: F4 F6 J3
    Date: 2023–03

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