Open Economies Review最新文献

This paper aims at assessing quantitatively the macroeconomic impact of EU sanctions against Russia for the economy of Cyprus. To this end, we use a medium-scale micro-founded DSGE model of a small open economy participating in a currency union like the euro area calibrated to the economy of Cyprus. The model features two sectors of production, namely the tradable and the non-tradable one. In this model, EU sanctions influence the sanctioning economy (i.e. Cyprus) through a mix of foreign shocks that hit in principle the tradable sector. In particular, to mimic the economic environment (namely, how all this started in 2022), we analyze first the effects of an energy-type shock modeled as a standard cost-push shock on imported goods. In turn, we add to this economic environment the impact of policy reactions like EU sanctions against Russia. In this context and given the strong trade ties of Cyprus with Russia, we model sanctions as two simultaneous negative exogenous shocks, that is, a temporary decrease in the exported goods, reflecting primarily reductions observed in tourism and financial services, and in inward foreign direct investment (FDI). Contrary to the mild impacts reported in the literature for the majority of EU countries we find non negligible negative effects for the economy of Cyprus which range from 1.24% to 3.13% in terms of average output loss in the short run. Given Cyprus’s vulnerable external position we show that the impact of sanctions depends crucially on the degree of tightening financing conditions which are likely to hit particularly more countries with high initial current account deficits and debt stocks.

This study investigates the role of external shocks on the stability of the foreign exchange(FX) market in a large panel of fifty advanced and emerging economies. I allow each country’s response of FX rate and capital inflows to vary according to institutional and economic factors through local projection methodology with country-level panel data. The results show that the negative impact of external shocks, such as US monetary policy and geopolitical risks, on the small open economies is substantial. Moreover, unanticipated US monetary tightening has a greater impact on exchange rates and capital inflows in emerging market economies compared to advanced economies. Furthermore, I test for state-dependence of the responses and discover that the effects of external shocks on the foreign exchange market are more pronounced in economies with a high sovereign debt ratio, high external debt ratio, or commodity-exporting ones. In addition, an economy with a high degree of trade openness or highly diversified exports is more likely to alleviate the negative spillovers of external shocks to the FX market.

In this supplement to Minford et al. Int J Financ Econ 26(2):19932021 (2021), we revisit the ‘puzzle’ in open economy studies that evidence of international risk-sharing is hardly seen despite active cross-country financial markets. We reassess both risk-pooling via state-contingent bonds, and uncovered interest parity – both were believed to be different, and spuriously rejected, in previous work – in the context of a full DSGE model of the New Keynesian type. We prove that the two models are identical, both analytically and numerically. When tested as part of such a full DSGE model by indirect inference which circumvents the bias of single-equation tests, we find universal evidence of international risk-sharing.

Since Leontief’s (Leontief 1953) seminal work on the factor content of trade, the validity of the Heckscher-Ohlin-model has been judged not only on the basis of formal tests of the theory but also tested against prior expectation. In this vein, this paper uses the Heckscher-Ohlin-Vanek (HOV) approach to investigate whether supposed US leadership in the digital domain can be traced back to digital task endowments embodied in labour services. In a comparison between EU member states and the US, we find that the latter is more intensive in digital tasks than the EU and that this difference is explained by both an intensity-effect (US occupations being more digital-task intensive) and a structural component (relatively more digital-task intensive occupations). Viewed through the lens of the HOV theorem we find that the US is abundant in digital tasks relative to non-digital tasks, while the opposite is true for the EU. The standard tests for the predictive power of the HOV theorem are high and in line with the results for labour in previous literature.

This paper examines the ability of macroprudential policies to dampen the pro-cyclicality of credit market cycles and to enhance the macroeconomic stability in countries open to cross-border banking activities. For the analysis, we develop a two-country dynamic stochastic general equilibrium model with collateral constrained investors and global banks. The existence of cross-border lending activities is the source of the transmission of shocks across countries. The macroprudential policies analyzed are loan-to-value ratios and capital requirements, also known as the capital adequacy ratio, which are formulated as Taylor-type rules. Our results show that the effectiveness of capital requirement financial regulations is undermined if borrowers can increase credit from foreign banks originating from a country with more relaxed financial restrictions. When cross-border lending is permitted, national financial regulators can improve the financial stability of credit growth and management of credit by complementing the capital adequacy ratios with loan-to-value ratios.

Capital flow surges have become a major source of concern as they have been often followed by disruptive reversals and sudden stops. We introduce F-score methodology which evaluates how well particular capital flow surge method can predict reversals and sudden stops. F-scores consider both type 1 and type 2 errors and provide policy makers a framework to weigh economic costs of false negative and false positive signals. We construct and compare a large number of commonly used surge identification approaches, including several machine-learning methods, to investigate which types of formulations best help explain which surges are more likely to be reversed. While considerable literature has investigated the determinants of capital flow reversals and sudden stops with surges being included as one of the independent variables, so far little research attention has been focused directly on attempting to determine the likelihood that particular surge will result in reversals or sudden stops. This is the most important question for policies toward capital inflows since the optimal responses to capital flow surges would be quite different depending on whether the flows are likely to be reversed or not. Unfortunately, theory does not offer a clear guide to identifying surges other than that they are unusually large inflows. We emphasize that appropriate evaluation should involve not only precision in predicting reversals but also accuracy in not giving false alarms by predicting reversals that do not occur. In other words, attention needs to be paid to both type 1 and type 2 errors.

This study has adopted the actual household expenditure data from the national accounts to construct a true inflation rate (using the Fisher index) and found that the official inflation rate in the 33 OECD countries was an overestimate of true inflation for 23 and underestimate in 10 countries in the first wave of the COVID-19 pandemic. The result obtained for the countries where true inflation was higher than the official rate in this study matches the results obtained by Cavallo (Inflation with covid consumption baskets, 2020) and Reinsdorf (COVID-19 and the CPI: Is inflation underestimated?, 2020). However, a significant difference has been detected for the countries where the official inflation exceeds the true measure in this study. The core reason behind the discrepancies is in the use of appropriate expenditure weights. This suggests caution in using credit-card based expenditure data when spending behaviour has changed dramatically.

The use of big data analytics (including data mining and predictive analytics) by firms can be expected to increase productivity and reduce trade costs, which should be positively related to export activities. This paper uses firm level data from the Flash Eurobarometer 486 survey conducted in February – May 2020 to investigate the link between the use of big data analytics and export activities in manufacturing enterprises from the 27 member countries of the European Union. We find that firms which use big data analytics do more often export, do more often export to various destinations all over the world, and do export to more different destinations. The estimated big data analytics premia for exports are statistically highly significant after controlling for firm size, firm age, patents, and country. Furthermore, the size of these premia can be considered to be large. Successful exporters tend to use big data analytics.

We evaluate the cross-country convergence of financial development and its relationship with GDP growth. Financial inclusion variables have been widely converged across countries, and the catch-up effect of countries with poor financial coverage mainly drives the convergence. In contrast, financial development measures — including domestic credit, liability, mutual fund size, and stock market capitalization — have diverged since 1985 despite the absolute convergence in GDP and financial inclusion. The GDP growth rates strongly correlate with the change in financial development but not the improvement in financial inclusion.

We evaluate the impact of income redistribution on the Brazilian GDP using a GVAR model with 33 economies from 1980Q1 to 2018Q4. We detect a significant impact of redistribution on the GDP, with investment contributing to the diffusion of the shock. We find that Brazilian redistributive policies affect the GDP of trade partners, mainly Latin American economies. Hence, we argue that redistribution provokes spillover effects. We also examine if external redistributive policies affect Brazil's GDP, and our estimates support this hypothesis. We created a new multiplier - the redistribution multiplier - and obtained values greater than two over time. Our research highlights the existence of spillover effects caused by redistributive policies and the importance of the international economy in the analysis. Redistribution policy effects are not enclosed to domestic borders.