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on Open Economy Macroeconomics |
| By: | Juarez, Leticia |
| Abstract: | I derive a model-based equation relating pass-through to buyer size and estimate it on the micro transaction level data for Colombia. I find that after an exchange rate shock, sellers connected to larger buyers face more moderate changes in their prices in the seller currency (i.e., lower exchange rate pass-through) than those connected to small buyers. Pass-through ranges from 1% for firms connected with the largest buyers and up to 17% for firms connected with the smallest buyers. I use the estimates from the empirical analysis to calibrate the model and propose a counterfactual where buyer market power is eliminated. Under this scenario, sellers' revenues increase; however, the price in seller currency is more responsive to exchange rate shocks. I study the impact of buyer market power on international price responses to exchange rate changes. In markets with high buyer concentration, larger foreign buyers secure marked-down prices that adjust flexibly to exchange rate shocks. Using a novel dataset of Colombian export transactions, I estimate an open economy oligopsony model with endogenous markdowns, revealing that sellers connected to larger buyers experience milder price changes (1% impact) compared to those connected with smaller buyers (15% impact). These findings highlight a trade-off: while larger buyers reduce seller revenues, they also reduce sellers' exposure to exchange rate volatility, emphasizing the strategic importance of buyer relationships in international markets. |
| Keywords: | Market power;Oligopsony;market structure;Markdown;Exchange-rate pass-through |
| JEL: | D43 E31 F31 F32 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14128 |
| By: | Leonardo Tariffi (University of Barcelona) |
| Abstract: | I first write a partial equilibrium model “á la Rogoff†where there are relative prices of non-tradable goods in terms of prices of tradables goods. I find that the behaviour of the real exchange rate shows structural breaks in the short term. Secondly, I explain that any change in the real exchange rate is transitory in the long run. I obtain a general equilibrium model after I add a utility function to the partial-equilibrium model. In the general equilibrium model, an increase occurring in consumption of tradables is going to keep the RER constant over the time. |
| Keywords: | Exchange rate, Non-tradable goods, General equilibrium model, Dynamics |
| JEL: | F31 F41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:476web |
| By: | Paul Bergin; Giancarlo Corsetti |
| Abstract: | Central banks around the world have grappled with the question of how to respond to the mix of inflationary and output implications of a trade war. Recent tariff changes have impacted a wider cross-section of goods than was true in the previous tariff round, targeting final consumption goods in addition to materials such as aluminum and steel. This paper studies the optimal monetary stabilization of tariffs using a New Keynesian model enriched with comparative advantage between multiple traded sectors that differ in terms of tariff exposure as well as market structure and price rigidity. We find that, in the aggregate, the optimal monetary response is expansionary, supporting activity and producer prices at the cost of tolerating short-run headline inflation – both in response to tariffs aimed at differentiated consumption goods and to tariffs on non-differentiated goods. The output and export dynamics arising from tariffs on each sector differ sharply, as do the motivations for an expansionary monetary response. Sectoral reallocation is an order of magnitude larger than predicted by standard macro models featuring one tradable and one nontradable sector. |
| JEL: | E52 F42 F44 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33845 |
| By: | Laura Alfaro; Paola Conconi; Fariha Kamal; Zachary Kroff |
| Abstract: | We leverage newly linked data from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis to study transactions within U.S. multinational enterprises (MNEs). We show that using administrative data on intrafirm trade allows us to correct for measurement error in survey data and to identify the positive relationship between input-output (IO) linkages and the probability of trade between U.S. parents and their foreign affiliates. We also document the prevalence of intrafirm trade: more than half (three-quarters) of affiliates worldwide (in North America) export to or import from their U.S. parent. Our findings provide strong empirical support for traditional theories of firm boundaries that predict trade between vertically linked units of the same firm, and underscore the importance of accounting for the trade frictions that shape MNEs’ regional supply chains. |
| JEL: | D23 F14 F23 F4 L20 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33887 |
| By: | O'Grady, Michael (Central Bank of Ireland) |
| Abstract: | Employing an augmented version of the synthetic control method, we estimate the effects of the Brexit vote shock and Irish border guarantees on trade patterns between Ireland and the UK, relative to other euro area economies. We let a matching algorithm determine a combination of comparison economies that best resembles the path of Irish bilateral trade with the UK before (i) the Brexit referendum and (ii) guarantees from both the UK and the EU to deliver a “no-border solution” to the island of Ireland. The differences between imports and exports for Ireland and its synthetic doppelganger represent this commitment to a “no-border solution” between Northern Ireland and the Irish Republic, mitigating the negative effects of the Brexit vote shock on bilateral Irish-UK trade. We show that, contrary to the prevailing narrative, Irish imports and exports did not respond to the uncertainty surrounding the Brexit vote to the same extent as other euro area member countries |
| Keywords: | Brexit, European Union, Synthetic Control Methods, Trade Policy Uncertainty, Globalization. |
| JEL: | E65 F13 F42 F68 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:2/rt/25 |
| By: | Laura Alfaro; Harald Fadinger; Jan S. Schymik; Gede Virananda |
| Abstract: | Trade and industrial policies, while primarily intended to support domestic industries, may unintentionally stimulate technological progress abroad. We document this mechanism in the case of rare earth elements (REEs) – critical inputs for manufacturing at the knowledge frontier, with low elasticity of substitution, inelastic supply, and high production and processing concentration. To assess the importance of REEs across industries, we construct an input-output table that includes disaggregated REE inputs. Using REE-related patents categorized by a large language model, sectoral TFP data, trade data, and physical and chemical substitution properties of REEs, we show that the introduction of REE export restrictions by China led to a global surge in innovation and exports in REE-intensive downstream sectors outside of China. To rationalize these findings and quantify the global impact of the adverse REE supply shock, we develop a quantitative general equilibrium model of trade and directed technological change. We also propose a structural method to estimate sectoral input substitution elasticities for REEs from patent data and find REEs to be complementary inputs. Under endogenous technologies and with complementary inputs, input supply restrictions on REEs induce a surge in REE-enhancing innovation and lead to an expansion of REE-intensive downstream sectors. |
| JEL: | E0 E6 F02 F13 F14 F42 F6 O1 O33 O47 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33877 |
| By: | Eduardo Dávila; Andrés Rodríguez-Clare; Andreas Schaab; Stacy Tan |
| Abstract: | The classic tariff formula states that the optimal unilateral tariff equals the inverse of the foreign export supply elasticity. We generalize this result and show that an intertemporal tariff formula characterizes the efficient tariff in a large class of dynamic heterogeneous agent (HA) economies with multiple goods. Intertemporal export supply elasticities and relative tariff revenue weights are sufficient statistics for the optimal tariff that decentralizes the efficient allocation. We also develop a general theory of second-best optimal tariffs. In dynamic HA incomplete markets economies, Ramsey optimal tariffs trade off intertemporal terms of trade manipulation against production efficiency, risk-sharing, and redistribution. Intertemporal export supply elasticities and relative tariff revenue weights remain sufficient statistics for the intertemporal terms of trade manipulation motive of second-best optimal tariffs. We apply our results to a quantitative heterogeneous agent New Keynesian (HANK) model with trade. |
| JEL: | F13 F41 H21 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33898 |
| By: | Graña Colella, Santiago; Silva Neira, Ignacio |
| Abstract: | Extensive economic literature has covered the effect of a natural resource boom on the performance of the manufacturing sector. Specifically, the dutch disease hypothesis establishes that increases in commodity prices should lead to a decrease in manufacturing exports, due to significant inflows of foreign currency that subsequently appreciate the real exchange rate. In 2003, a substantial increase in commodity prices, coupled with a pronounced appreciation of the real exchange rate, triggered a process of export primarization in latin american countries. The paper aims to empirically assess whether the dutch disease framework can provide a suitable explanation for this phenomenon in argentina and chile. Despite both countries heavily depending on natural resources, they exhibit notable differences in economic scale, composition, and evolution of manufacturing exports, as well as their economic policy approaches throughout the designated period. This task is performed through the estimation of one var model for each country (2003-2019). The main results indicate that while there is insufficient evidence to assert that argentina suffered from the dutch disease, the evidence for chile remains inconclusive. These divergent results could potentially find clarification in an examination of disparities in export composition and integrated technology and thereby suggest a broader analysis regarding the policy implications. |
| Keywords: | Enfermedad Holandesa; Exportaciones; Competitividad; Análisis Econométrico; Argentina; Chile; |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:nmp:nuland:4312 |
| By: | Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Industrial policy has become a core item in the policy agenda of many governments as well as of the EU which has come up with many policy initiatives over the past two decades. This paper emphasises the important shifts taking place in the global economy with the rise of China but also of other emerging/ed economies that affect the competitiveness of the European economy and challenges its traditional comparative advantages. The challenge to the European economy is compounded by having been left behind in some of the most innovative areas and branches of economic activity (IT, most recently AI, quantum and cloud computing) and also lagging behind in important technological shifts in more traditional industries (such as EVs in the transport equipment industry). On top of this – but also linked to global economic developments – have come rather big ruptures in geo-political relationships such as the decline of multilateral institutions and increasing conflictual relationships amongst the major acting powers on the global political stage. We discuss in this paper the challenges that EU industrial policy has to meet given the trends in geo-politics and geo-economics. |
| Keywords: | EU, industrial policy, geo-economics, geo-politics, industrial restructuring |
| JEL: | F02 F42 F51 F6 L5 L16 L52 O25 O31 O33 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:pnotes:pn:96 |