We examine the relation between real interest rate volatility and aggregate fluctuations for a diverse sample of countries. Compiling a new dataset including emerging and advanced countries, the substantial variation in our data yields novel results: (a) stochastic volatility outperforms Markov‐switching in representing interest rates, (b) some advanced economies can be more volatile than emerging markets, and (c) creditors take on more debt following volatility shocks. We show how an equilibrium business cycle model with uncertainty shocks can generate these facts. Sample heterogeneity produces significant parameter differences, playing an important role in distinguishing the effects of volatility shocks.
{"title":"Interest Rate Volatility and Macroeconomic Dynamics: Heterogeneity Matters","authors":"Michael Curran, Adnan Velic","doi":"10.1111/roie.12477","DOIUrl":"https://doi.org/10.1111/roie.12477","url":null,"abstract":"We examine the relation between real interest rate volatility and aggregate fluctuations for a diverse sample of countries. Compiling a new dataset including emerging and advanced countries, the substantial variation in our data yields novel results: (a) stochastic volatility outperforms Markov‐switching in representing interest rates, (b) some advanced economies can be more volatile than emerging markets, and (c) creditors take on more debt following volatility shocks. We show how an equilibrium business cycle model with uncertainty shocks can generate these facts. Sample heterogeneity produces significant parameter differences, playing an important role in distinguishing the effects of volatility shocks.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126298724","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many developing countries have experienced export‐led growth in the last half century. This paper asks whether the content of what economies export matters for human capital accumulation. We construct a small open economy model and find that expansion of primary exports can harm human capital accumulation if the economy is initially allocating significant resources to the production of primary goods. We then test this prediction empirically using Latin American data over the period 1965 to 2010 and find robust evidence in support of the hypothesis that a shift towards primary exports reduces human capital accumulation. Given the importance of the latter for long‐run growth, our results suggest a potential role for policy intervention.
{"title":"Exports of Primary Goods and Human Capital Accumulation","authors":"Yulin Hou, Cem Karayalçin","doi":"10.1111/roie.12428","DOIUrl":"https://doi.org/10.1111/roie.12428","url":null,"abstract":"Many developing countries have experienced export‐led growth in the last half century. This paper asks whether the content of what economies export matters for human capital accumulation. We construct a small open economy model and find that expansion of primary exports can harm human capital accumulation if the economy is initially allocating significant resources to the production of primary goods. We then test this prediction empirically using Latin American data over the period 1965 to 2010 and find robust evidence in support of the hypothesis that a shift towards primary exports reduces human capital accumulation. Given the importance of the latter for long‐run growth, our results suggest a potential role for policy intervention.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114298985","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper uses a structural gravity approach, specifying currency movements as trade cost component to derive an empirical trade balance model, which incorporates multilateral resistance terms and accounts for the cross-country variation in the exchange rate pass-through into import and export prices. The model is estimated using quarterly bilateral trade flows between 47 countries over the period 2010Q1-2017Q2, disaggregated into 97 commodity groups. Our results support the existence of an "aggregate" J-curve, pooled over commodity groups; at the same time they point to considerable heterogeneity in the trade balance dynamics across industries below the surface of aggregate data.
{"title":"Trade Balance Dynamics and Exchange Rates: In Search of the J‐Curve Using a Structural Gravity Approach","authors":"Harald Badinger, Aurélien Fichet de Clairfontaine","doi":"10.1111/roie.12426","DOIUrl":"https://doi.org/10.1111/roie.12426","url":null,"abstract":"This paper uses a structural gravity approach, specifying currency movements as trade cost component to derive an empirical trade balance model, which incorporates multilateral resistance terms and accounts for the cross-country variation in the exchange rate pass-through into import and export prices. The model is estimated using quarterly bilateral trade flows between 47 countries over the period 2010Q1-2017Q2, disaggregated into 97 commodity groups. Our results support the existence of an \"aggregate\" J-curve, pooled over commodity groups; at the same time they point to considerable heterogeneity in the trade balance dynamics across industries below the surface of aggregate data.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130627836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
En este documento se desarrolla un modelo del comercio de vehículos usados entre países con diferentes regulaciones ambientales con respecto a las emisiones de autos. Se prueba que en EUA, dado las estrictas regulaciones ambientales, hay incentivos para exportar autos usados a México, lo cual afecta las emisiones de contaminación del aire por la movilidad vehicular en México. Utilizando una base de datos del registro de vehículos en México y de importaciones posteriores a la firma de TLCAN, se encuentra que las importaciones de vehículos usados de México redujeron el promedio de emisiones de contaminantes vehiculares debido principalmente al "efecto técnico" -diferencia de emisiones de vehículos de modelo y edad comparables entre los que circulan en EUA antes de ser importados (emiten menos contaminantes) y los que circulan en México.
{"title":"Trade Liberalization, Consumption Shifting and Pollution: Evidence from Mexico's Used Vehicle Imports","authors":"Liangheng Chen, B. Cecilia Garcia‐Medina, Rui Wan","doi":"10.1111/roie.12436","DOIUrl":"https://doi.org/10.1111/roie.12436","url":null,"abstract":"En este documento se desarrolla un modelo del comercio de vehículos usados entre países con diferentes regulaciones ambientales con respecto a las emisiones de autos. Se prueba que en EUA, dado las estrictas regulaciones ambientales, hay incentivos para exportar autos usados a México, lo cual afecta las emisiones de contaminación del aire por la movilidad vehicular en México. Utilizando una base de datos del registro de vehículos en México y de importaciones posteriores a la firma de TLCAN, se encuentra que las importaciones de vehículos usados de México redujeron el promedio de emisiones de contaminantes vehiculares debido principalmente al \"efecto técnico\" -diferencia de emisiones de vehículos de modelo y edad comparables entre los que circulan en EUA antes de ser importados (emiten menos contaminantes) y los que circulan en México.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122249985","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The international trade literature confirms that the average productivity of exporters is higher than that of non-exporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region-specific transportation costs in a Melitz-type heterogeneous firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant-level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.
{"title":"Regional Variations in Exporters’ Productivity Premium: Theory and Evidence","authors":"Toshihiro Okubo, Eiichi Tomiura","doi":"10.1111/roie.12398","DOIUrl":"https://doi.org/10.1111/roie.12398","url":null,"abstract":"The international trade literature confirms that the average productivity of exporters is higher than that of non-exporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region-specific transportation costs in a Melitz-type heterogeneous firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant-level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"134 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133977688","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of this paper is to show that export cartels are not necessarily harmful for consumers in the importing countries. Using the strategic trade policy model of Brander and Spencer (1985a), we show that, contrary to the harmful effect, product-market cooperation benefits consumers by affecting the trade policies. We further show that consumers in the importing countries are affected adversely if cooperation is among the governments of the exporting countries, instead of the exporting firms.
本文的目的是表明出口卡特尔不一定对进口国的消费者有害。利用Brander and Spencer(1985)的战略贸易政策模型，我们表明，与有害效应相反，产品-市场合作通过影响贸易政策使消费者受益。我们进一步表明，如果出口国政府之间的合作，而不是出口企业之间的合作，进口国的消费者将受到不利影响。
{"title":"Export Cartel and Consumer Welfare","authors":"A. Mukherjee, U. Sinha","doi":"10.1111/roie.12362","DOIUrl":"https://doi.org/10.1111/roie.12362","url":null,"abstract":"The purpose of this paper is to show that export cartels are not necessarily harmful for consumers in the importing countries. Using the strategic trade policy model of Brander and Spencer (1985a), we show that, contrary to the harmful effect, product-market cooperation benefits consumers by affecting the trade policies. We further show that consumers in the importing countries are affected adversely if cooperation is among the governments of the exporting countries, instead of the exporting firms.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"40 5","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113991364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider the multinational firm's decision on whether to enter a new market immediately via direct investment or to contract initially with a local agent and (possibly) invest later. Use of a local agent allows the multinational to avoid costly mistakes by finding out if the market is large enough to support direct investment. However, the agent is able to extract information rents from the multinational due to being better informed about market characteristics. We derive the optimal sequence of agent contracts and discuss situations in which the multinational contracts initially with a local agent and then converts subsequently to an owned sales operation.
{"title":"Learning to Sell in New Markets: A Preliminary Analysis of Market Entry by a Multinational Firm","authors":"Ignatius J. Horstmann, J. Markusen","doi":"10.1111/roie.12369","DOIUrl":"https://doi.org/10.1111/roie.12369","url":null,"abstract":"We consider the multinational firm's decision on whether to enter a new market immediately via direct investment or to contract initially with a local agent and (possibly) invest later. Use of a local agent allows the multinational to avoid costly mistakes by finding out if the market is large enough to support direct investment. However, the agent is able to extract information rents from the multinational due to being better informed about market characteristics. We derive the optimal sequence of agent contracts and discuss situations in which the multinational contracts initially with a local agent and then converts subsequently to an owned sales operation.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128974378","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper considers the interrelationship between a hierarchy of consumption needs of agricultural goods, manufactures, and services as a central feature of the demand side of economies and the demand for skilled and unskilled workers, whose incomes differ. The relationship is established as skilled and unskilled labor are used in conjunction with capital goods in a nested constant‐elasticity‐of‐substitution (CES) production function, which features capital‐skill complementarity and a substitutive relationship between the bundle of capital and skills on the one hand and unskilled labor on the other hand. Incomes differ across countries both within and between types of workers. As trade costs change, relative and absolute incomes of worker types change and so does the worker‐type‐specific pattern of consumption. A calibration and simulation exercise documents that a consideration of the supply‐and‐demand‐side linkage in this hierarchy‐of‐needs model matters quantitatively for the role of trade liberalization in the world economy.
{"title":"Sources of Heterogeneous Gains from Trade: Income Differences and Non‐Homothetic Preferences","authors":"P. Egger, Sergey Nigai","doi":"10.1111/roie.12368","DOIUrl":"https://doi.org/10.1111/roie.12368","url":null,"abstract":"This paper considers the interrelationship between a hierarchy of consumption needs of agricultural goods, manufactures, and services as a central feature of the demand side of economies and the demand for skilled and unskilled workers, whose incomes differ. The relationship is established as skilled and unskilled labor are used in conjunction with capital goods in a nested constant‐elasticity‐of‐substitution (CES) production function, which features capital‐skill complementarity and a substitutive relationship between the bundle of capital and skills on the one hand and unskilled labor on the other hand. Incomes differ across countries both within and between types of workers. As trade costs change, relative and absolute incomes of worker types change and so does the worker‐type‐specific pattern of consumption. A calibration and simulation exercise documents that a consideration of the supply‐and‐demand‐side linkage in this hierarchy‐of‐needs model matters quantitatively for the role of trade liberalization in the world economy.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126947016","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes a multinational firm’s foreign direct investment decision, through either greenfield investment or cross‐border merger and acquisition, into a host country with an input monopoly that adopts either uniform pricing or discriminatory pricing. The optimal foreign entry mode could differ under each pricing policy. Under Cournot competition, firms’ technological gap and the initial local market structure are critical to the choice of foreign entry mode, whereas product substitutability is important under Bertrand competition. In the presence of foreign entry, this paper also examines the welfare effects of input price discrimination for the host country.
{"title":"Foreign Direct Investment, Input Prices, and Host Country Welfare","authors":"Kuo‐Feng Kao, Chin-Sheng Chen","doi":"10.1111/roie.12355","DOIUrl":"https://doi.org/10.1111/roie.12355","url":null,"abstract":"This paper analyzes a multinational firm’s foreign direct investment decision, through either greenfield investment or cross‐border merger and acquisition, into a host country with an input monopoly that adopts either uniform pricing or discriminatory pricing. The optimal foreign entry mode could differ under each pricing policy. Under Cournot competition, firms’ technological gap and the initial local market structure are critical to the choice of foreign entry mode, whereas product substitutability is important under Bertrand competition. In the presence of foreign entry, this paper also examines the welfare effects of input price discrimination for the host country.","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131759910","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigated how childhood education and experiences helped to form noncognitive skills and later, trade policy preferences. We used individual‐level data with approximately 10,000 observations collected in July 2016. Using the instrumental variables (IV) method, with sporting experience and informal education in the childhood as exogenous IV, we found that (1) sporting experiences and informal education lead people to have positive subjective views about the role of group work, competition, reciprocity, and generalized trust and (2) positive views about the role of group work, competition, reciprocity, and trust leads people to prefer the Trans‐Pacific Strategic Economic Partnership Agreement (TPP).
{"title":"Trade Policy Preference, Childhood Sporting Experience, and Informal School Curriculum: An Examination of Views of the TPP from the Viewpoint of Behavioral Economics","authors":"Eiji Yamamura, Y. Tsutsui","doi":"10.1111/roie.12356","DOIUrl":"https://doi.org/10.1111/roie.12356","url":null,"abstract":"We investigated how childhood education and experiences helped to form noncognitive skills and later, trade policy preferences. We used individual‐level data with approximately 10,000 observations collected in July 2016. Using the instrumental variables (IV) method, with sporting experience and informal education in the childhood as exogenous IV, we found that (1) sporting experiences and informal education lead people to have positive subjective views about the role of group work, competition, reciprocity, and generalized trust and (2) positive views about the role of group work, competition, reciprocity, and trust leads people to prefer the Trans‐Pacific Strategic Economic Partnership Agreement (TPP).","PeriodicalId":351939,"journal":{"name":"Wiley-Blackwell: Review of International Economics","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116938938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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