Journal of International Economics最新文献

This paper studies consequences of the large exchange rate depreciation occurring when the UK electorate unexpectedly voted to leave the European Union. Sterling plummeted, recording the biggest one-day depreciation of any of the world's four major currencies since Bretton Woods. The prospect of Brexit happening generated sizable differences in how much sterling depreciated against different currencies. Coupled with pre-referendum cross-country trade patterns, this generated variations in exchange rates facing businesses in different industries. The paper offers evidence of a cost shock from the prices of intermediate imports rising by more in higher depreciation industries, but with no revenue offset from exports. Workers were impacted by these increased cost pressures, not in terms of job loss but through relative real wage declines in higher depreciation, larger cost shock industries. This resulted in an aggregate fall in real wage growth of 3 to 3.6% cumulatively over the three years after the referendum.

We exploit exogenous shocks to flight distances over time to estimate the distance effect in airborne trade within panel regressions. We find a negative distance effect, which we interpret as evidence of a link between transportation costs and airborne trade. Notably, this relationship is driven almost entirely by changes at the extensive margin. Specifically, trade in HS 6 product categories with intermittent trading histories becomes dormant when flight distances increase. Conversely, the intensive margin of trade remains largely unaffected.

We study how financial frictions affect the importance of trend productivity shocks for macroeconomic fluctuations. Using long-run data from 17 small open economies (SOEs), we compare two variants of a workhorse SOE real business cycle model featuring a debt-elastic interest rate (DEIR), a measure of financial frictions. The first variant estimates the DEIR parameter, while the second fixes it to 0.001, effectively abstracting from financial frictions. On average, ignoring financial frictions doubles the contribution of trend shocks to output fluctuations. This suggests that a proper assessment of the quantitative effects of trend shocks requires reasonable DEIR values.

China's outsized real estate sector has long been a key engine of growth. However, with decades of construction at break-neck speeds having produced a massive increase in the quantity and quality of China's housing stock, the question arises as to whether diminishing returns are beginning to set in. At the same time, there is the question of whether real estate has been a major driver of today's high levels of local government debt, which may create heightened financial vulnerabilities. We investigate these questions using a new database that includes city level estimates of China's housing stock. Our formal statistical results suggest that real estate is indeed running into diminishing returns to growth while at the same time being a significant driver of local government debt, with both effects being driven mainly by China's smaller and less prosperous tier 3 cities (which nevertheless account for 60% of GDP).

We use detailed firm-level data from Mexico to document that non-financial corporations engage in carry trades by borrowing in foreign currency (FX) and lending in domestic currency, largely in the form of trade credit, accumulating currency risk in the process. Firms are more active in carry-trades when FX borrowing is relatively cheaper and build currency risk by accumulating peso assets. We use the 2009 Mexican peso depreciation to show that firms that were more active in carry trades experienced larger reductions in investment. Nevertheless, their extension of trade credit remained stable, insulating their trading partners from their balance sheet exposure to the shock.

Using firm-to-firm transactions, we show that starting to supply a ‘superstar’ firm (large domestic firms, exporters and multinationals) boosts productivity by 8% after three years. Placebos on starting relationships with smaller firms and novel identification strategies support a causal interpretation of “superstar spillovers”. Consistent with a model of technology transfer, we find bigger treatment effects from technology-intensive superstars and also falls in markups (in order to win superstar contracts). We also show that firms that start supplying superstar firms enjoy a ‘dating agency’ effect — an increase in the number of new buyers that is particularly strong within the superstar firm’s network. Taken together, the results suggest an important role for raising productivity through superstars’ supply chains regardless of multinational status.

This paper empirically examines the effects of financial crises on the organization of production of multinational enterprises. We construct a panel of European multinational networks from 2003 through 2015. We compute a multinational-specific shock based on the geographical structure of the network and the extent of the financial crisis in the countries belonging to the network. We document that multinationals facing a larger shock to their network experience lower growth in their number of affiliates and a deterioration in parents’ performance. This adjustment to the financial crisis is accounted for by multinationals with initially more leveraged parents, and it is exacerbated in networks more dependent on external financing. Moreover, initially more leveraged affiliates are more likely to be dropped from a multinational network. These findings lend support to financial frictions shaping multinational activity.

The impact of the 2018–2019 trade war on total US exports depends on the direct effect of foreign retaliatory tariffs as well as on the ability of US exporters to reorganize global supply chains and redirect exports to other markets, away from retaliating countries. We document that the sharp decline in US exports to retaliating countries was compensated by a gradual increase in exports to other markets. We then develop a model of export reallocation to study the role of financial constraints and the persistence or stickiness of trade relationships as underlying mechanisms shaping both the direct impact of retaliatory tariffs and the extent of the reallocation toward alternative markets. In line with the predictions of the model, we find that in industries with high leverage, Chinese retaliatory tariffs led to a stronger decline in US exports to China but a larger increase in exports to the rest of the world. We find a similar pattern among industries with less persistent trade relationships. Finally, we document that other potential mechanisms do not appear to be economically and/or statistically significant in shaping the response to tariffs.

This paper examines customer demand-side factors that affect deviation from covered interest rate parity (CIP) with respect to the dollar (i.e., cross-currency basis), particularly when arbitrageurs are constrained. Using novel detailed daily transaction-level data on the universe of Israeli institutional investors (IIs), we employ a granular instrumental variable (GIV) estimation to investigate how IIs’ FX swap demand affects CIP deviation. Our findings demonstrate that a one standard deviation shock to IIs’ FX swap demand when capital is abundant has no effect on IIs’ basis. However, when capital is scarce, the demand shock produces a significant reduction of 12 basis points in IIs’ basis. Our results showcase how limits of arbitrage, together with demand shocks from a large customer base, can drive CIP deviations.

We use firm-level data to analyze international bond issuance by Chinese non-financial corporations, distinguishing those by sectors classed as ‘risky’. Dollar issuance is positively correlated with the differential between domestic and foreign interest rates, and this effect is particularly strong for firms in risky sectors. Strikingly, firms in risky sectors use the proceeds to do more interfirm lending than firms in non-risky sectors. Moreover, this lending rose significantly after the authorities sought to restrict the financial activities of risky sectors in 2008–09. Firms in risky sectors compound risk by engaging in speculative activities that mimic the behavior of financial institutions while escaping prudential regulation.