Pub Date : 2025-11-04DOI: 10.1016/j.jinteco.2025.104186
Lu Han
Exporters frequently change their set of destination markets. This paper proposes a new approach to identifying the underlying drivers of changes in exporters’ market decisions over time. The approach exploits information on price and quantity changes in firms’ continuing markets to disentangle the micro shocks that drive firms’ market changes. Applying the method to customs data from China (2000–2006) and the UK (2010–2016), I find consistent results showing that most firm- and firm-product-level market changes are driven by demand-related shocks, with a nontrivial proportion of these changes being correlated across markets.
{"title":"What drives exporters’ market dynamics? A new framework for disentangling micro shocks","authors":"Lu Han","doi":"10.1016/j.jinteco.2025.104186","DOIUrl":"10.1016/j.jinteco.2025.104186","url":null,"abstract":"<div><div>Exporters frequently change their set of destination markets. This paper proposes a new approach to identifying the underlying drivers of changes in exporters’ market decisions over time. The approach exploits information on price and quantity changes in firms’ continuing markets to disentangle the micro shocks that drive firms’ market changes. Applying the method to customs data from China (2000–2006) and the UK (2010–2016), I find consistent results showing that most firm- and firm-product-level market changes are driven by demand-related shocks, with a nontrivial proportion of these changes being correlated across markets.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"159 ","pages":"Article 104186"},"PeriodicalIF":4.0,"publicationDate":"2025-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145519389","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-28DOI: 10.1016/j.jinteco.2025.104181
Nicolás E. Magud, Samuel Pienknagura
Using individual-level surveys for 42 countries (advanced economies and emerging markets and developing economies) spanning about 40 years, we show that cohorts with higher exposure to past inflationary episodes systematically express higher concerns over inflation. This link is stronger for women and poorer individuals; when exposure occurs in the latter part of the individual’s working-age (lifecycle theory); and it diminishes with individuals’ trust in institutions. Country characteristics also affect the link between past inflation exposure and inflation concerns—it is amplified by macroeconomic instability, and reduced with institutions’ quality, aggregate income, and democratic development. Higher contemporaneous inflation affects inflation concerns but does not increase the sensitivity of inflation concerns to past experience. In turn, inflation concerns have macroeconomic implications, as inflation expectations are more responsive to inflationary shocks in countries where concerns about inflation are more entrenched. This could potentially affect central banks’ ability to anchor inflation expectations.
{"title":"Inflated concerns: Exposure to past inflationary episodes and preferences for price stability","authors":"Nicolás E. Magud, Samuel Pienknagura","doi":"10.1016/j.jinteco.2025.104181","DOIUrl":"10.1016/j.jinteco.2025.104181","url":null,"abstract":"<div><div>Using individual-level surveys for 42 countries (advanced economies and emerging markets and developing economies) spanning about 40 years, we show that cohorts with higher exposure to past inflationary episodes systematically express higher concerns over inflation. This link is stronger for women and poorer individuals; when exposure occurs in the latter part of the individual’s working-age (lifecycle theory); and it diminishes with individuals’ trust in institutions. Country characteristics also affect the link between past inflation exposure and inflation concerns—it is amplified by macroeconomic instability, and reduced with institutions’ quality, aggregate income, and democratic development. Higher contemporaneous inflation affects inflation concerns but does not increase the sensitivity of inflation concerns to past experience. In turn, inflation concerns have macroeconomic implications, as inflation expectations are more responsive to inflationary shocks in countries where concerns about inflation are more entrenched. This could potentially affect central banks’ ability to anchor inflation expectations.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104181"},"PeriodicalIF":4.0,"publicationDate":"2025-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145424722","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-27DOI: 10.1016/j.jinteco.2025.104183
Seunghoon Na , Yinxi Xie
This paper studies exchange rate dynamics and excess currency returns by incorporating bounded rationality into a small open-economy New Keynesian model. Decision-makers have limited foresight, planning only up to a finite horizon and approximating continuation values with coarse value functions learned from past experiences. This behavior generates an initial underreaction, followed by an overreaction in beliefs, leading to dynamic overshooting of exchange rate forecast errors. Moreover, the coexistence of forward- and backward-looking components in expectation formation breaks the forecast-horizon invariance implied from rational expectations. Our model thus provides a micro-foundation for understanding time- and forecast-horizon variability in uncovered interest parity (UIP) puzzles, and its predictions align closely with empirical estimates.
{"title":"Expectations and the UIP puzzles when foresight is limited","authors":"Seunghoon Na , Yinxi Xie","doi":"10.1016/j.jinteco.2025.104183","DOIUrl":"10.1016/j.jinteco.2025.104183","url":null,"abstract":"<div><div>This paper studies exchange rate dynamics and excess currency returns by incorporating bounded rationality into a small open-economy New Keynesian model. Decision-makers have limited foresight, planning only up to a finite horizon and approximating continuation values with coarse value functions learned from past experiences. This behavior generates an initial underreaction, followed by an overreaction in beliefs, leading to dynamic overshooting of exchange rate forecast errors. Moreover, the coexistence of forward- and backward-looking components in expectation formation breaks the forecast-horizon invariance implied from rational expectations. Our model thus provides a micro-foundation for understanding time- and forecast-horizon variability in uncovered interest parity (UIP) puzzles, and its predictions align closely with empirical estimates.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104183"},"PeriodicalIF":4.0,"publicationDate":"2025-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145474202","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-24DOI: 10.1016/j.jinteco.2025.104182
Lucía Casal , Rafael Guntin
We study the drivers of business cycle volatility differences between emerging and developed economies. We develop a multisector small open economy framework with heterogeneous firms and production linkages in which firms are subject to sectoral and firm-level TFP shocks and international prices shocks. Using sector-level, firm-level, and international trade data from various developed and emerging economies, we quantify the relevant model-based sufficient statistics. We find that differences in sectoral composition between emerging and developed economies can explain up to 77% of the excessive business cycle volatility in emerging economies, while disparities in the distribution of firms account for up to 9%, and the role of international prices shocks is negligible. Despite the significant influence of sectoral composition, the decrease in volatility observed in emerging economies over the past four decades cannot be attributed to changes in their economic structure.
{"title":"The business cycle volatility puzzle: Emerging vs developed economies","authors":"Lucía Casal , Rafael Guntin","doi":"10.1016/j.jinteco.2025.104182","DOIUrl":"10.1016/j.jinteco.2025.104182","url":null,"abstract":"<div><div>We study the drivers of business cycle volatility differences between emerging and developed economies. We develop a multisector small open economy framework with heterogeneous firms and production linkages in which firms are subject to sectoral and firm-level TFP shocks and international prices shocks. Using sector-level, firm-level, and international trade data from various developed and emerging economies, we quantify the relevant model-based sufficient statistics. We find that differences in sectoral composition between emerging and developed economies can explain up to 77% of the excessive business cycle volatility in emerging economies, while disparities in the distribution of firms account for up to 9%, and the role of international prices shocks is negligible. Despite the significant influence of sectoral composition, the decrease in volatility observed in emerging economies over the past four decades cannot be attributed to changes in their economic structure.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104182"},"PeriodicalIF":4.0,"publicationDate":"2025-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145424721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-16DOI: 10.1016/j.jinteco.2025.104173
Stefano Federico, Giuseppe Marinelli, Francesco Palazzo
This paper explores how a demand shock in an export market propagates through the domestic banking system. The 2014 dual shocks of sanctions and falling oil prices significantly reduced sales for Italian exporters to Russia, leading to increased liquidity needs. Banks more exposed to these exporters accommodated their credit demand to address liquidity shortfalls but simultaneously reduced credit supply, especially to ex ante risky borrowers not directly affected by the shock. Our findings suggest a bank capital channel at play, mitigating trade shocks for some firms while transmitting them to the broader economy.
{"title":"Export shocks and banks’ domestic credit: Balancing liquidity provision and risk mitigation","authors":"Stefano Federico, Giuseppe Marinelli, Francesco Palazzo","doi":"10.1016/j.jinteco.2025.104173","DOIUrl":"10.1016/j.jinteco.2025.104173","url":null,"abstract":"<div><div>This paper explores how a demand shock in an export market propagates through the domestic banking system. The 2014 dual shocks of sanctions and falling oil prices significantly reduced sales for Italian exporters to Russia, leading to increased liquidity needs. Banks more exposed to these exporters accommodated their credit demand to address liquidity shortfalls but simultaneously reduced credit supply, especially to ex ante risky borrowers not directly affected by the shock. Our findings suggest a bank capital channel at play, mitigating trade shocks for some firms while transmitting them to the broader economy.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104173"},"PeriodicalIF":4.0,"publicationDate":"2025-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145424723","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-13DOI: 10.1016/j.jinteco.2025.104175
Silvia Marchesi , Giovanna Marcolongo
This paper investigates the relationship between financial crises in developing countries and variation of bank deposits in offshore financial centers. Using a stacked difference-in-differences estimator, we find that three years after the onset of the crisis, bank deposits in tax havens increase by almost 30 percent. The effect appears independent of tax rates and is primarily driven by countries with weak institutions. We add to the literature on tax havens as we find that they not only facilitate tax evasion and corruption in “normal times”, but also absorb resources during financial crises, when most needed.
{"title":"Knockin’ on H(e)aven’s door. Financial crises and offshore wealth","authors":"Silvia Marchesi , Giovanna Marcolongo","doi":"10.1016/j.jinteco.2025.104175","DOIUrl":"10.1016/j.jinteco.2025.104175","url":null,"abstract":"<div><div>This paper investigates the relationship between financial crises in developing countries and variation of bank deposits in offshore financial centers. Using a stacked difference-in-differences estimator, we find that three years after the onset of the crisis, bank deposits in tax havens increase by almost 30 percent. The effect appears independent of tax rates and is primarily driven by countries with weak institutions. We add to the literature on tax havens as we find that they not only facilitate tax evasion and corruption in “normal times”, but also absorb resources during financial crises, when most needed.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104175"},"PeriodicalIF":4.0,"publicationDate":"2025-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145332943","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-13DOI: 10.1016/j.jinteco.2025.104179
Emilio César Espino , Julian Kozlowski , Fernando M. Martin , Juan M. Sánchez
Emerging economies have adopted fiscal and monetary rules to discipline government policy. We study the value and macroeconomic implications of rules and flexibility within a sovereign-default model that incorporates domestic fiscal and monetary policies and long-term external debt. Adopting monetary targets and debt limits during normal times yields welfare gains. Suspending rules can significantly influence policy, macroeconomic outcomes, and welfare during large, unforeseen crises. The gains from flexibility depend on how quickly policymakers are able to reimpose rules after the crisis.
{"title":"Policy rules and large crises in emerging markets","authors":"Emilio César Espino , Julian Kozlowski , Fernando M. Martin , Juan M. Sánchez","doi":"10.1016/j.jinteco.2025.104179","DOIUrl":"10.1016/j.jinteco.2025.104179","url":null,"abstract":"<div><div>Emerging economies have adopted fiscal and monetary rules to discipline government policy. We study the value and macroeconomic implications of rules and flexibility within a sovereign-default model that incorporates domestic fiscal and monetary policies and long-term external debt. Adopting monetary targets and debt limits during normal times yields welfare gains. Suspending rules can significantly influence policy, macroeconomic outcomes, and welfare during large, unforeseen crises. The gains from flexibility depend on how quickly policymakers are able to reimpose rules after the crisis.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104179"},"PeriodicalIF":4.0,"publicationDate":"2025-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145332942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-10DOI: 10.1016/j.jinteco.2025.104180
Fabio Ghironi , Galip Kemal Ozhan
We study an unconventional policy tool – interest rate uncertainty – that may be used to discourage inefficient capital inflows and to adjust the composition of external accounts between short-term securities and foreign direct investment (FDI). We show that identified interest rate volatility shocks in several emerging markets lower GDP growth, raise inflation, improve the current account, and depreciate the real exchange rate. In a calibrated open-economy New Keynesian model, we introduce a policy rule that endogenously adjusts the volatility of interest rate shocks in response to capital-flow drivers. The uncertainty policy discourages short-term portfolio inflows through portfolio-risk and consumption-smoothing channels, while a markup channel, reinforced by exchange-rate depreciation, attracts FDI. The strength of the markup transmission depends on exchange-rate pass-through. The uncertainty policy may be welfare improving if designed against uncertainty shocks that drive capital flows. However, it may be welfare reducing against level shocks that drive capital inflows.
{"title":"Interest rate uncertainty as a policy tool?","authors":"Fabio Ghironi , Galip Kemal Ozhan","doi":"10.1016/j.jinteco.2025.104180","DOIUrl":"10.1016/j.jinteco.2025.104180","url":null,"abstract":"<div><div>We study an unconventional policy tool – interest rate uncertainty – that may be used to discourage inefficient capital inflows and to adjust the composition of external accounts between short-term securities and foreign direct investment (FDI). We show that identified interest rate volatility shocks in several emerging markets lower GDP growth, raise inflation, improve the current account, and depreciate the real exchange rate. In a calibrated open-economy New Keynesian model, we introduce a policy rule that endogenously adjusts the volatility of interest rate shocks in response to capital-flow drivers. The uncertainty policy discourages short-term portfolio inflows through <em>portfolio-risk</em> and <em>consumption-smoothing channels</em>, while a <em>markup channel</em>, reinforced by exchange-rate depreciation, attracts FDI. The strength of the markup transmission depends on exchange-rate pass-through. The uncertainty policy may be welfare improving if designed against uncertainty shocks that drive capital flows. However, it may be welfare reducing against level shocks that drive capital inflows.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104180"},"PeriodicalIF":4.0,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145332939","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-08DOI: 10.1016/j.jinteco.2025.104178
Yuancheng Han , Jorge Miranda-Pinto , Satoshi Tanaka
How much does trade in services affect regional production specialization and welfare? Using unique Canadian trade data, we document that the size of inter-provincial service trade is comparable to that of good trade, and that net exports of services are highly correlated with the value-added share of services across provinces. With a spatial model featuring domestic and international trade, we quantify the effects of service trade. Our results highlight that domestic service trade significantly promotes regional specialization, with heterogeneous welfare gains that reduce regional disparities. Conversely, international service trade generates more uniform welfare gains across provinces.
{"title":"Service Trade, regional specialization, and welfare","authors":"Yuancheng Han , Jorge Miranda-Pinto , Satoshi Tanaka","doi":"10.1016/j.jinteco.2025.104178","DOIUrl":"10.1016/j.jinteco.2025.104178","url":null,"abstract":"<div><div>How much does trade in services affect regional production specialization and welfare? Using unique Canadian trade data, we document that the size of inter-provincial service trade is comparable to that of good trade, and that net exports of services are highly correlated with the value-added share of services across provinces. With a spatial model featuring domestic and international trade, we quantify the effects of service trade. Our results highlight that domestic service trade significantly promotes regional specialization, with heterogeneous welfare gains that reduce regional disparities. Conversely, international service trade generates more uniform welfare gains across provinces.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104178"},"PeriodicalIF":4.0,"publicationDate":"2025-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145268069","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-07DOI: 10.1016/j.jinteco.2025.104177
Oscar Meneses, Lorenzo Menna, Martin Tobal
On January 7, 2025, Argentina's EMBI spread plunged by over 114 basis points. J.P. Morgan later revealed that the decline was due to a technical error, creating a rare natural experiment—an exogenous shift in sovereign risk pricing. Because this error was neither anticipated nor related to Argentina's fundamentals or global conditions, the experiment provides a unique setting to identify the “information effect,” whereby investors update their beliefs in response to noisy signals embedded in price movements. Using a Difference-in-Differences approach and high-frequency (intraday) stock market data, we find that Argentine equities outperformed those of other EMEs during the error window, indicating that investors revised their asset valuations based on mispriced signals. These results underscore the importance of clear and timely communication in emerging market economies to prevent second-order effects that, despite solid fundamentals, can trigger herding behavior and macrofinancial instability.
{"title":"Argentina: The honor student—By merit and by mistake. A natural experiment on “information effects”","authors":"Oscar Meneses, Lorenzo Menna, Martin Tobal","doi":"10.1016/j.jinteco.2025.104177","DOIUrl":"10.1016/j.jinteco.2025.104177","url":null,"abstract":"<div><div>On January 7, 2025, Argentina's EMBI spread plunged by over 114 basis points. J.P. Morgan later revealed that the decline was due to a technical error, creating a rare natural experiment—an exogenous shift in sovereign risk pricing. Because this error was neither anticipated nor related to Argentina's fundamentals or global conditions, the experiment provides a unique setting to identify the “information effect,” whereby investors update their beliefs in response to noisy signals embedded in price movements. Using a Difference-in-Differences approach and high-frequency (intraday) stock market data, we find that Argentine equities outperformed those of other EMEs during the error window, indicating that investors revised their asset valuations based on mispriced signals. These results underscore the importance of clear and timely communication in emerging market economies to prevent second-order effects that, despite solid fundamentals, can trigger herding behavior and macrofinancial instability.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"158 ","pages":"Article 104177"},"PeriodicalIF":4.0,"publicationDate":"2025-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145268065","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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