Number of results to display per page
Search Results
72. The Trade Effects of Preferential Arrangements: New Evidence from the Australia Productivity Commission
- Author:
- Dean A. DeRosa
- Publication Date:
- 01-2007
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics (PIIE)
- Abstract:
- This paper critically examines “new” evidence from the gravity model that indicates the majority of preferential trading arrangements (PTAs) today are predominantly trade diverting. This new evidence on trade diversion was presented in a recent Australia Productivity Commission (APC) working paper. Although no major faults are found in the methodology of the APC study, the present analysis finds the opposite conclusion—that the majority of current PTAs are predominantly trade creating—when a variant of the gravity model formulated by Andrew Rose is applied to up-to-date regression data using a variety of econometric methods, including the Tobit regression method employed by the APC study.
- Topic:
- Economics, Foreign Exchange, and Treaties and Agreements
- Political Geography:
- Australia/Pacific
73. Foreign Direct Investment, Corruption, and Democracy
- Author:
- Aparna Mathur and Kartikeya Singh
- Publication Date:
- 05-2007
- Content Type:
- Working Paper
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- This paper studies how factors such as corruption perception and the level of democracy influence foreign direct investment to developing economies. Our results suggest that less corrupt countries and less democratic countries receive more foreign direct investment. What could account for this pattern of investment?
- Topic:
- Corruption, Democratization, Foreign Exchange, and International Trade and Finance
74. Oil Shocks and External Adjustment
- Author:
- Luca Guerrieri, Martin Bodenstein, and Christopher J. Erceg
- Publication Date:
- 06-2007
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- This paper investigates how oil price shocks affect the trade balance and terms of trade in a two country DSGE model. We show that the response of the external sector depends critically on the structure of financial market risk-sharing. Under incomplete markets, higher oil prices reduce the relative wealth of an oil-importing country, and induce its nonoil terms of trade to deteriorate, and its nonoil trade balance to improve. The magnitude of the nonoil terms of trade response hinges on structural parameters that affect the divergence in wealth effects across oil importers and exporters, including the elasticity of substitution between oil and other inputs in production, and the discount factor. By contrast, cross-country wealth differences effectively disappear under complete markets, with the implication that oil shocks have essentially no effect on the nonoil terms of trade or the nonoil trade balance.
- Topic:
- Economics, Foreign Exchange, International Trade and Finance, Markets, and Oil
75. Exchange Rate Pass-Through to Export Prices: Assessing Some Cross-Country Evidence
- Author:
- Robert Vigfusson, Nathan Sheets, and Joseph Gagnon
- Publication Date:
- 09-2007
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- A growing body of empirical work has found evidence of a decline in exchange rate pass-through to import prices in a number of industrial countries. Our paper complements this work by examining pass-through from the other side of the transaction; that is, we assess the exchange rate sensitivity of export prices (denominated in the exporter's currency). We first sketch out a streamlined analytical model that highlights some key factors that determine pass-through. Using this model as reference, we find that the prices charged on exports to the United States are more responsive to the exchange rate than is the case for export prices to other destinations, which is consistent with results in the literature suggesting that import price pass-through in the U.S. market is relatively low. We also find that moves in the exchange rate sensitivity of export prices over time have been significantly affected by country and region-specific factors, including the Asian financial crisis (for emerging Asia), deepening integration with the United States (for Canada), and the effects of the 1992 ERM crisis (for the United Kingdom).
- Topic:
- Economics, Foreign Exchange, International Trade and Finance, and Markets
- Political Geography:
- United States, United Kingdom, Canada, and Asia
76. U.S. External Adjustment: Is It Disorderly? Is It Unique? Will It Disrupt the Rest of the World?
- Author:
- Steven B. Kamin and Trevor A. Reeve
- Publication Date:
- 04-2007
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- In recent years, a number of studies have analyzed the experiences of a broad range of industrial economies during periods when their current account deficits have narrowed. Such studies identified systematic aspects of external adjustment, but it is unclear how good a guide the experience of other countries may be to the effects of a future narrowing of the U.S. external imbalance. In contrast, this paper focuses in depth on the historical experience of external adjustment in the United States. Using data from the past thirty-five years, we compare economic performance in episodes during which the U.S. trade balance deteriorated and episodes during which it adjusted. We find trade balance adjustment to have been generally benign: U.S. real GDP growth tended to fall, but not to a statistically significant extent; housing construction slumped; inflation generally rose modestly; and although nominal interest rates tended to rise, real interest rates fell. The paper then compares these outcomes to those in foreign industrial economies. We find that the economic performance of the United States during periods of external adjustment is remarkably similar to the foreign experience. Finally, we also examine the performance of the foreign industrial economies during the periods of U.S. deterioration and adjustment. Contrary to concerns that U.S. adjustment will prove injurious to foreign economies, our analysis suggests that the foreign economies fared reasonably well during past periods when the U.S. trade deficit narrowed: the growth of domestic demand and real GDP abroad generally strengthened during such episodes, although inflation and interest rates tended to rise as well.
- Topic:
- Economics, Foreign Exchange, International Trade and Finance, and Markets
- Political Geography:
- United States
77. The Case for an International Reserve Diversification Standard
- Author:
- Edwin M. Truman and Anna Wong
- Publication Date:
- 05-2006
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics (PIIE)
- Abstract:
- Rumors about the actual or potential currency diversification of countries' foreign exchange holdings out of dollars are not a new phenomenon. This working paper argues that such concerns about reserve diversification are exaggerated. We present evidence that the extent of actual diversification has been modest to date. Nevertheless, the potential for reserve diversification adds volatility to foreign exchange markets and can catalyze abrupt exchange rate movements. We argue that policymakers acting in their own national interests can do something constructive to reduce the volatility introduced into foreign exchange and financial markets by rumors of large-scale international foreign exchange reserve diversification. We propose the voluntary adoption by major foreign exchange reserve holders in particular of an International Reserve Diversification Standard consisting of two elements: (1) routine disclosure of the currency composition of official foreign exchange holdings and (2) a commitment by each adherent to adjust gradually the actual currency composition of its reserves to any new benchmark for those holdings.
- Topic:
- Economics, Foreign Exchange, Government, and International Trade and Finance
78. Regional Monetary Integration among Developing Countries: New Opportunities for Macroeconomic Stability beyond the Theory of Optimum Currency Areas?
- Author:
- Laurissa Muhlich and Barbara Fritz
- Publication Date:
- 12-2006
- Content Type:
- Working Paper
- Institution:
- German Institute of Global and Area Studies
- Abstract:
- Optimum Currency Area (OCA) approaches turn to be inadequate in the analysis of the new regional monetary integration schemes that have sprung up among developing and emerging market economies. Instead, in accordance with the concept of 'original sin' (Eichengreen et al.) we argue that regional monetary South-South integration schemes that, unlike North-South arrangements, involve none of the international reserve currencies, have specific monetary constraints and implications which need to be duly considered. A first comparative analysis of three cases of monetary South-South cooperation in South Africa (CMA), East Asia (ASEAN) and Latin America (Mercosur) shows that these can indeed provide macroeconomic stability gains but that this strongly depends on the existence of economic hierarchies within these integration schemes.
- Topic:
- Development, Economics, Foreign Exchange, and Third World
- Political Geography:
- East Asia, South Africa, and Latin America
79. Wrangling Over Arms Sales to China
- Author:
- Rachel Stohl
- Publication Date:
- 12-2006
- Content Type:
- Policy Brief
- Institution:
- Foreign Policy In Focus
- Abstract:
- On June 4, 1989, the world watched in horror as the Chinese government's crackdown on student protestors took a deadly turn. As Chinese soldiers fired their weapons indiscriminately and Chinese tanks rolled through Tiananmen Square, an unknown number of students and soldiers were killed. The Chinese military continued its campaign of terror throughout the summer of 1989, drawing strong international condemnation.
- Topic:
- Security, Foreign Policy, Arms Control and Proliferation, and Foreign Exchange
- Political Geography:
- China, Europe, and Asia
80. Flying Geese or Sitting Ducks: China's Impact on the Trading Fortunes of other Asian Economies
- Author:
- Alan J. Ahearne, John G. Fernald, John W. Schindler, and Prakash Loungani
- Publication Date:
- 12-2006
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a 'flying geese' pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China's dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage.
- Topic:
- Development, Economics, Foreign Exchange, International Trade and Finance, and Markets
- Political Geography:
- China, South Asia, and Asia