Concern over currency manipulation plays a major role in international economic diplomacy. Unfortunately, the concept is not well defined, and the most coherent explanations apply to a concept more accurately termed “saving manipulation,” as it has little to do with market exchange rates. I argue that the costs of currency manipulation are far lower than they are widely assumed to be and that the optimal response is either to do nothing or to boost domestic saving rates.
{"title":"Currency Manipulation, Saving Manipulation, and the Current Account Balance","authors":"Scott Sumner","doi":"10.2139/ssrn.3545994","DOIUrl":"https://doi.org/10.2139/ssrn.3545994","url":null,"abstract":"Concern over currency manipulation plays a major role in international economic diplomacy. Unfortunately, the concept is not well defined, and the most coherent explanations apply to a concept more accurately termed “saving manipulation,” as it has little to do with market exchange rates. I argue that the costs of currency manipulation are far lower than they are widely assumed to be and that the optimal response is either to do nothing or to boost domestic saving rates.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133545406","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 propose factor-augmented out of sample forecasting models for the real exchange rate between Korea and the US. We estimate latent common factors by applying an array of data dimensionality reduction methods to a large panel of monthly frequency time series data. We augment benchmark forecasting models with common factor estimates to formulate out-of-sample forecasts of the real exchange rate. Major findings are as follows. First, our factor models outperform conventional forecasting models when combined with factors from the US macroeconomic predictors. Second, our factor models perform well at longer horizons when American real activity factors are employed, whereas American nominal/financial market factors help improve short-run prediction accuracy. Third, models with global PLS factors from UIP fundamentals overall perform well, while PPP and RIRP factors play a limited role in forecasting.
{"title":"Common Factor Augmented Forecasting Models for the US Dollar-Korean Won Exchange Rate","authors":"Hyeongwoo Kim, Soohyon Kim","doi":"10.2139/ssrn.3537962","DOIUrl":"https://doi.org/10.2139/ssrn.3537962","url":null,"abstract":"We propose factor-augmented out of sample forecasting models for the real exchange rate between Korea and the US. We estimate latent common factors by applying an array of data dimensionality reduction methods to a large panel of monthly frequency time series data. We augment benchmark forecasting models with common factor estimates to formulate out-of-sample forecasts of the real exchange rate. Major findings are as follows. First, our factor models outperform conventional forecasting models when combined with factors from the US macroeconomic predictors. Second, our factor models perform well at longer horizons when American real activity factors are employed, whereas American nominal/financial market factors help improve short-run prediction accuracy. Third, models with global PLS factors from UIP fundamentals overall perform well, while PPP and RIRP factors play a limited role in forecasting.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122212209","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 investigates the effects of fiscal policy, measured as the extent to which private saving is offset by public saving, in the process of international financial integration. Using extensive panel data for 87 countries over the period 1970–2010, we find that the dynamics for the saving offset are highly nonlinear and time‐varying. While the saving offset has gradually declined in line with rapid financial integration in advanced economies, it has remained broadly stable in less financially integrated emerging and developing economies. This implies that the negative wealth effects of fiscal policy in advanced economies have been smaller owing to higher financial integration, which could help governments reduce their debt burdens through the well‐anchored domestic interest rates at the world level.
{"title":"Measuring the Time‐Varying Effects of Fiscal Policy on Private Saving in the Process of Financial Integration","authors":"Dooyeon Cho, J. Pyun","doi":"10.1111/roie.12442","DOIUrl":"https://doi.org/10.1111/roie.12442","url":null,"abstract":"This paper investigates the effects of fiscal policy, measured as the extent to which private saving is offset by public saving, in the process of international financial integration. Using extensive panel data for 87 countries over the period 1970–2010, we find that the dynamics for the saving offset are highly nonlinear and time‐varying. While the saving offset has gradually declined in line with rapid financial integration in advanced economies, it has remained broadly stable in less financially integrated emerging and developing economies. This implies that the negative wealth effects of fiscal policy in advanced economies have been smaller owing to higher financial integration, which could help governments reduce their debt burdens through the well‐anchored domestic interest rates at the world level.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130636627","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}
Thispaperevaluatesthee?ectofforeigntakeoveronwagesofworkersinGerman establishments, using rich linked employer-employee data from 2003 to 2014. To identify a causal e?ect of foreign takeover, we combine propensityscore matching with a di?erence-in-di?erence estimator. We ?nd that a takeoverbyaforeigninvestorleadstoawagepremiumof4.0logpointsinthe year after ownership change, which further increases to 6.3 log points three years after acquisition. The wage premium is largest for high-skilled workers and higher for managers than for non-managers. We also show that the wage premium does not pick up an exporter e?ect due to a platform investment of the foreign owner, that it takes four to ?ve years before it fully develops, and that the wage increase is speci?c to foreign acquisition instead of ownership change per se.
{"title":"Reassessing the Foreign Ownership Wage Premium in Germany","authors":"H. Egger, Elke J. Jahn, Stefan Kornitzky","doi":"10.1111/twec.12910","DOIUrl":"https://doi.org/10.1111/twec.12910","url":null,"abstract":"Thispaperevaluatesthee?ectofforeigntakeoveronwagesofworkersinGerman establishments, using rich linked employer-employee data from 2003 to 2014. To identify a causal e?ect of foreign takeover, we combine propensityscore matching with a di?erence-in-di?erence estimator. We ?nd that a takeoverbyaforeigninvestorleadstoawagepremiumof4.0logpointsinthe year after ownership change, which further increases to 6.3 log points three years after acquisition. The wage premium is largest for high-skilled workers and higher for managers than for non-managers. We also show that the wage premium does not pick up an exporter e?ect due to a platform investment of the foreign owner, that it takes four to ?ve years before it fully develops, and that the wage increase is speci?c to foreign acquisition instead of ownership change per se.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132924533","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 provides clear evidence that increased exposure to import competition from low-income countries results in lower quality matches between workers and firms, using matched employer-employee data from Italy. I measure match quality as the match (worker-firm) fixed effect from a wage regression that includes a rich set of time-varying observables, as well as worker and firm fixed effects. In order to account for the potential endogeneity of industry-level imports, I use low-income countries' import share in a set of other high-income countries as an instrumental variable. Import shocks reduce match quality, shifting the entire distribution of match effects leftward. Additional analysis suggests that workers are more likely to leave high-quality matches because of import competition, implying that good worker-firm matches become relatively less valuable. This finding highlights a new channel through which workers can be negatively affected by trade shocks.
{"title":"Any Port in a Storm: Import Competition and Match Quality Downgrading","authors":"J. Chan","doi":"10.2139/ssrn.3521608","DOIUrl":"https://doi.org/10.2139/ssrn.3521608","url":null,"abstract":"This paper provides clear evidence that increased exposure to import competition from low-income countries results in lower quality matches between workers and firms, using matched employer-employee data from Italy. I measure match quality as the match (worker-firm) fixed effect from a wage regression that includes a rich set of time-varying observables, as well as worker and firm fixed effects. In order to account for the potential endogeneity of industry-level imports, I use low-income countries' import share in a set of other high-income countries as an instrumental variable. Import shocks reduce match quality, shifting the entire distribution of match effects leftward. Additional analysis suggests that workers are more likely to leave high-quality matches because of import competition, implying that good worker-firm matches become relatively less valuable. This finding highlights a new channel through which workers can be negatively affected by trade shocks.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"321 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127695952","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}
Globalization means that various things to completely different individuals. It is often outlined merely as associate growth of economic activities across political boundaries of nation states. Additional significantly it refers to a method of deepening economic integration, increasing economic openness and growing economic mutuality between countries within the world economy. It is associated not solely with an outstanding unfold and volume of cross-border economic transactions however additionally with a company of economic activities that straddle national boundaries of the globe. Economic process in India is mostly taken as desegregation the economy of the country with the remainder of the globe. This paper will brief an introduction and objective of globalization. This paper also deals with the Major Steps towards Globalization and Challenges of globalization and its effects on India.
{"title":"Globalization of Trade and the Impact on the Economy","authors":"S. Sawale, Dr. Ashok Pawar","doi":"10.2139/ssrn.3521228","DOIUrl":"https://doi.org/10.2139/ssrn.3521228","url":null,"abstract":"Globalization means that various things to completely different individuals. It is often outlined merely as associate growth of economic activities across political boundaries of nation states. Additional significantly it refers to a method of deepening economic integration, increasing economic openness and growing economic mutuality between countries within the world economy. It is associated not solely with an outstanding unfold and volume of cross-border economic transactions however additionally with a company of economic activities that straddle national boundaries of the globe. Economic process in India is mostly taken as desegregation the economy of the country with the remainder of the globe. This paper will brief an introduction and objective of globalization. This paper also deals with the Major Steps towards Globalization and Challenges of globalization and its effects on India.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116286457","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 investigates international technology diffusion through FDI by explicitly considering the ownership structure of FDI projects with detailed Chinese data. We find that international joint ventures (JVs) generate significantly positive technology diffusion effects, while wholly foreign‐owned firms (WFOs) generate significantly negative competition effects. The differentiated impacts of JVs and WFOs are robust, heterogeneous and causal as shown by our instrumental variable estimation. As for the mechanisms, evidence suggests that JVs bring better technology to the host country, invest more in R&D and employee training, and also provide easier technology access to local firms than WFOs.
{"title":"International Joint Ventures and Technology Diffusion: Evidence from China","authors":"Qing Liu, Ruosi Lu, Chaojun Yang","doi":"10.1111/twec.12809","DOIUrl":"https://doi.org/10.1111/twec.12809","url":null,"abstract":"This paper investigates international technology diffusion through FDI by explicitly considering the ownership structure of FDI projects with detailed Chinese data. We find that international joint ventures (JVs) generate significantly positive technology diffusion effects, while wholly foreign‐owned firms (WFOs) generate significantly negative competition effects. The differentiated impacts of JVs and WFOs are robust, heterogeneous and causal as shown by our instrumental variable estimation. As for the mechanisms, evidence suggests that JVs bring better technology to the host country, invest more in R&D and employee training, and also provide easier technology access to local firms than WFOs.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"1 1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125869234","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 examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and represented 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.
{"title":"Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism","authors":"Kyle Handley, Fariha Kamal, R. Monarch","doi":"10.3386/w26611","DOIUrl":"https://doi.org/10.3386/w26611","url":null,"abstract":"We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we document the implied incidence and scope of new import tariffs. Firms that eventually faced tariff increases on their imports accounted for 84% of all exports and represented 65% of manufacturing employment. For all affected firms, the implied cost is $900 per worker in new duties. To estimate the effect on U.S. export growth, we construct product-level measures of import tariff exposure of U.S. exports from the underlying firm micro data. More exposed products experienced 2 percentage point lower growth relative to products with no exposure. The decline in exports is equivalent to an ad valorem tariff on U.S. exports of almost 2% for the typical product and almost 4% for products with higher than average exposure.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126495738","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}
During the 2018-2019 trade war, U.S. exports have been affected by foreign retaliatory tariffs, U.S. import tariffs that act through input-output linkages, and policy uncertainty. We establish, first, that the large negative impact of foreign tariffs on U.S. exports is highly heterogeneous across destinations and industries, being much larger among exports to China, particularly of industrial supplies, and is explained by the degree of product differentiation and the extent to which trade occurs within related parties. Second, supply chains matter, as U.S. import tariffs lead to lower exports by industries using targeted imports as inputs. Third, beyond the direct impact of tariffs, uncertainty appears to play an important role, as suggested by a collapse in exports of durable goods relative to nondurables, and in sectors facing a larger risk of tariff increases. The severity of the trade war's impact on U.S. exports is amplified by a limited ability to redirect exports across markets: increased exports to the rest of the world only partially offset the decline in sales to China. Finally, we establish that the impact of tariffs on U.S. export volumes and prices is essentially different than that of exchange rates.
{"title":"Dissecting the Impact of the 2018-2019 Trade War on U.S. Exports","authors":"Felipe Benguria, Felipe E. Saffie","doi":"10.2139/ssrn.3505413","DOIUrl":"https://doi.org/10.2139/ssrn.3505413","url":null,"abstract":"During the 2018-2019 trade war, U.S. exports have been affected by foreign retaliatory tariffs, U.S. import tariffs that act through input-output linkages, and policy uncertainty. We establish, first, that the large negative impact of foreign tariffs on U.S. exports is highly heterogeneous across destinations and industries, being much larger among exports to China, particularly of industrial supplies, and is explained by the degree of product differentiation and the extent to which trade occurs within related parties. Second, supply chains matter, as U.S. import tariffs lead to lower exports by industries using targeted imports as inputs. Third, beyond the direct impact of tariffs, uncertainty appears to play an important role, as suggested by a collapse in exports of durable goods relative to nondurables, and in sectors facing a larger risk of tariff increases. The severity of the trade war's impact on U.S. exports is amplified by a limited ability to redirect exports across markets: increased exports to the rest of the world only partially offset the decline in sales to China. Finally, we establish that the impact of tariffs on U.S. export volumes and prices is essentially different than that of exchange rates.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125570434","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 documents that U.S. housing capital investment is a strong negative predictor of U.S. dollar changes and excess returns over the next six months to five years. Other advanced economies exhibit similar patterns. Moreover, positive housing supply shocks predict lower prices of housing services and nontradables relative to that of tradables, as well as higher output growth and macroeconomic volatility. An analytical model shows that these channels generate the exchange rate predictability under incomplete and complete markets, respectively. Cross-sectionally, currencies with higher loadings on the U.S. housing cycle carry higher average currency premia, compensating the U.S. investor for bearing the U.S. long-run consumption risk.
{"title":"Housing Cycles and Exchange Rates","authors":"Sai Ma, Shaojun Zhang","doi":"10.2139/ssrn.3384816","DOIUrl":"https://doi.org/10.2139/ssrn.3384816","url":null,"abstract":"This paper documents that U.S. housing capital investment is a strong negative predictor of U.S. dollar changes and excess returns over the next six months to five years. Other advanced economies exhibit similar patterns. Moreover, positive housing supply shocks predict lower prices of housing services and nontradables relative to that of tradables, as well as higher output growth and macroeconomic volatility. An analytical model shows that these channels generate the exchange rate predictability under incomplete and complete markets, respectively. Cross-sectionally, currencies with higher loadings on the U.S. housing cycle carry higher average currency premia, compensating the U.S. investor for bearing the U.S. long-run consumption risk.","PeriodicalId":391101,"journal":{"name":"Econometric Modeling: International Economics eJournal","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121786481","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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