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71. Thinking Beyond the Pandemic: Monetary Policy Challenges in the Medium- to Long-Term

Author:
Marek Dabrowski
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance. This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
Topic:
Monetary Policy, Economic Growth, Trade, Pandemic, and COVID-19
Political Geography:
Europe and Global Focus

72. El comercio internacional de armamento y las ventajas comparativas

Author:
Victoria Alonso
Publication Date:
11-2021
Content Type:
Journal Article
Journal:
Journal on International Security Studies (RESI)
Institution:
International Security Studies Group (GESI) at the University of Granada
Abstract:
En este artículo se pretende explicar la adecuación de los modelos que explican el comercio internacional en términos generales al ámbito del comercio internacional de material de defensa. Estudiaremos la evolución de los modelos explicativos del comercio para ver en quémedida servirán o no para explicar el comercio en seguridad y defensa, particularmente en el modelo Heckscher-Ohlin. Con el objeto a entender el comercio de material de uso militar recurrimos a un análisis de la composición de la industria,estudiando casos de los principales exportadores e importadores, así como los motivos que llevan adar el salto de la mera producción de bienes al comercio internacional teniendo en cuenta las distintas maneras de exportar y las regulaciones a las que se puede enfrentar la industria cuando decide lanzarse al comercio internacional.
Topic:
Defense Policy, International Trade and Finance, Trade, and Industry
Political Geography:
Global Focus

73. Determinants of Wage (Dis-)Satisfaction: Trade Exposure, Export-Led Growth, and the Irrelevance of Bargaining Structure

Author:
Lucio Baccaro and Erik Neimanns
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
Although the determinants of wage militancy and moderation have been studied extensively by comparative political economists, so far the literature has focused on the macro level of analysis. As a result, there has been no attempt to analyze the determinants of individual-level attitudes towards wages. Based on two waves of the International Social Survey Programme, in this paper we fill this gap. We examine to what extent workers internalize the imperatives of competitiveness, and whether wage bargaining institutions facilitate this internalization, as suggested by a large literature on neocorporatism. Surprisingly, we find that the structure of wage bargaining (more or less coordinated or centralized) has no relationship with wage satisfaction or dissatisfaction at the individual level. Instead, wage dissatisfaction decreases strongly when workers are individually exposed to trade and countries rely heavily on export-led growth. Our results point to the need to rethink the determinants of wage moderation.
Topic:
Exports, Trade, Collective Bargaining, and Wages
Political Geography:
Global Focus

74. Trade and Transport Margins in Pharmaceuticals and other R&D-Intensive Industries

Author:
Tom Martin
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Spending for prescription and over-the-counter pharmaceutical products totaled $413 billion in 2012 according to the Bureau of Economic Analysis’ (BEA) trade and transports margin data. Just over half of this spending (52%) accrued to the pharmaceutical companies that produced the medicines, while the remainder was divided between transport and wholesale margins (21%) and retail margins (26%). Compared to other research and development (R&D)-intensive manufacturing industries with significant consumer sales, the pharmaceutical and medicines manufacturing industry ranks second in terms of R&D intensity behind communications equipment, and receives the second lowest producers’ share of total spending after other miscellaneous manufacturing. Thus, the pharmaceutical industry is unique among manufacturing industries in that it devotes a large share of its revenue to R&D, despite receiving a considerably smaller share of total spending.
Topic:
Science and Technology, Trade, Transportation, Medicine, and Pharmaceuticals
Political Geography:
Global Focus

75. On the Heterogeneous Trade and Welfare Effects of GATT/WTO Membership

Author:
Gabriel Felbermayr, Mario Larch, Erdal Yalcin, and Yoto V. Yotov
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefitting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.
Topic:
International Political Economy, Trade, WTO, and GATT
Political Geography:
Global Focus

76. Covid-19 Shocking Global Value Chains

Author:
Peter Eppinger, Gabriel Felbermayr, Oliver Krebs, and Bohdan Kukharsky
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmitting the shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects are magnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
Topic:
International Political Economy, Trade, Pandemic, Global Value Chains, COVID-19, and Supply Chains
Political Geography:
China and Global Focus

77. Coping with Disasters: Two Centuries of International Official Lending

Author:
Sebastian Horn, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Official (government-to-government) lending is much larger than commonly known, often surpassing total private cross-border capital flows, especially during disasters such as wars, financial crises and natural catastrophes. We assemble the first comprehensive long-run dataset of official international lending, covering 230,000 loans, grants and guarantees extended by governments, central banks, and multilateral institutions in the period 1790-2015. Historically, wars have been the main catalyst of government-to-government transfers. The scale of official credits granted in and around WW1 and WW2 was particularly large, easily surpassing the scale of total international bailout lending after the 2008 crash. During peacetime, development finance and financial crises are the main drivers of official cross-border finance, with official flows often stepping in when private flows retrench. In line with the predictions of recent theoretical contributions, we find that official lending increases with the degree of economic integration. In crises and disasters, governments help those countries to which they have greater trade and banking exposure, hoping to reduce the collateral damage to their own economies. Since the 2000s, official finance has made a sharp comeback, largely due to the rise of China as an international creditor and the return of central bank cross-border lending in times of stress, this time in the form of swap lines.
Topic:
Debt, International Political Economy, War, History, Financial Crisis, Trade, and Banking
Political Geography:
Global Focus

78. Assessing Asia: Sub-Saharan Africa Global Value Chain Linkages

Author:
Heiwai Tang, Douglas Zhihua Zeng, and Albert Zeufack
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper studies the relationship between Asia’s economic engagements in Africa and individual African nations’ participation in global value chains (GVC) over the past two decades. We find that while overall exports from Africa to Asia are still highly concentrated in resource-intensive sectors, a few African countries have exploited the emerging opportunities to diversify export portfolios through exporting to Asia. Each African nation has a distinct main trade partner in Asia, in contrast to the common view that China has become the dominant trade partner of most African nations. Using a panel data set for 46 African countries over 16 years from 2000 and 2015, we find that exports to Asia are positively correlated with exports to the rest of the world, suggesting that in contrast to trade diversion, trade with Asia complements exports to other countries. Asian economic engagement in the continent is associated with countries’ exports “moving up the value chain”, as measured by the upstreamness index proposed by Antras et al. (2012). However, such process was accompanied by a reduction in the length of their production chains, implying that fewer stages and countries are now involved in the production of exported goods.
Topic:
Development, International Political Economy, Natural Resources, Partnerships, Exports, Trade, Global Value Chains, and Data
Political Geography:
Africa, Asia, and Global Focus

79. Comparative Advantage in (Non-)Routine Production

Author:
Liza Archanskaia, Johannes Van Biesebroeck, and Gerald Willmann
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor literature, into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is that labor reallocation across tasks is subject to frictions, the importance of which varies by country. The arrival of capital-augmenting innovations triggers the movement of workers out of routine tasks, and countries with low labor market frictions become relatively abundant in non-routine labor. In the new equilibrium, more flexible countries specialize in producing goods that use non-routine labor more intensively. We document empirically that the ranking of countries with respect to the routine intensity of their exports is strongly related to labor market institutions and to cultural norms that influence adjustment to technological change, such as risk aversion or long-term orientation. The explanatory power of this mechanism for trade flows is especially strong for intra-EU trade.
Topic:
International Political Economy, Science and Technology, Innovation, Trade, and Trade Policy
Political Geography:
Global Focus and European Union

80. Does the Belt and Road Initiative stimulate Chinese Exports? The Role of State-Owned Enterprises

Author:
Holger Görg and Haiou Mao
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper evaluates firms’ exporting responses to BRI and considers their heterogeneity in ownership types, product types, regional origin and trade mode. This is done by analyzing firm-product-destination level customs data from 2011 to 2015 in a gravity model framework. Our empirical results show that aggregate export behavior did not change significantly after BRI. However, ownership matters when evaluating firms’ reactions. SOEs increase their total exporting and average export value (the intensive margin) to BRI countries, while private domestic firms show no reaction to BRI at any margin. Further, our results on regional heterogeneity suggests that “open through the west”, i.e., boosting the development of western regions in China, did not appear to work in the short term. Our findings show clearly the implications of BRI’s impact from a firm level perspective.
Topic:
International Political Economy, Belt and Road Initiative (BRI), Exports, Trade, and Economic Development
Political Geography:
China and Global Focus