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Begin New Search Topic Economics Publishing Institution Board of Governors of the Federal Reserve System

121. Long-Run Supply Effects and the Elasticities Approach to Trade

Author:
Joseph E. Gagnon
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Krugman (1989) argued that differences across countries in estimated income elasticities of import demand are due to omission of an exporter supply effect. He showed that such an effect can be derived in a theoretical model with economies of scale in production and a taste for variety in consumption. In his model, countries grow by producing new varieties of goods, and they are able to export these goods without suffering any deterioration in their terms of trade. This paper analyzes U.S. import demand from different source countries and finds strong evidence of a supply effect of roughly half the magnitude (0.75) of the income elasticity (1.5). Price elasticities for the most part are estimated close to -1, which is typical for the literature. Exclusion of the supply effect leads to overestimation of the income elasticity. Results based on U.S. exports to different destinations are less robust, but largely corroborate these findings.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

122. Firm-Level Access To International Capital Markets: Evidence From Chilean Equities

Author:
Francis E. Warnock and Sara B. Holland
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
High growth, liquid Chilean firms have greater relative weights in U.S. equity portfolios, but the most important determinant of a firm's portfolio weight is whether it is listed on a U.S. exchange. Cross-listing does not, however, appear to have permanent benefits: Weights in U.S. portfolios of firms that cross-listed in the mid-1990s increased at the expense of firms that cross-listed earlier. Put another way, firms appear to be able to access international capital at the time of the cross-listing, but this access may well be short-lived.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
South America

123. The Response of Hours to a Technology Shock: Evidence Based on Direct Measures of Technology

Author:
Robert J. Vigfusson, Lawrence J. Christiano, and Martin Eichenbaum
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We investigate what happens to hours worked after a positive shock to technology, using the aggregate technology series computed in Basu, Fernald and Kimball (1999). We conclude that hours worked rise after such a shock.
Topic:
Economics, Industrial Policy, and Science and Technology
Political Geography:
United States

124. China and Emerging Asia: Comrades or Competitors?

Author:
John W. Schindler, John G. Fernald, Prakash Loungani, and Alan J. Ahearne
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Do increases in China's exports reduce exports of other emerging Asian economies? We find that correlations between Chinese export growth and that of other emerging Asian economies are actually positive (though usually not significant), even after controlling for trading-partner income growth and real effective exchange rates. We also present results from a VAR estimation of aggregate trade equations on the relative importance of foreign income and exchange rates in determining Asian export growth. Although exchange rates do matter for export performance, the income growth of trading partners matters even more. In addition, we examine specific products and find evidence that a considerable shifting of trade patterns is taking place, consistent with a 'flying geese' pattern in which China and ASEAN-4 move into the product space vacated by the NIEs. Our results suggest that China and emerging Asia are both comrades (overall) and competitors (in specific products).
Topic:
Economics and Emerging Markets
Political Geography:
China and Asia

125. How Does the Border Affect Productivity? Evidence from American and Canadian Manufacturing Industries

Author:
Robert J. Vigfusson
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper studies how much of productivity fluctuations are industry specific versus how much are country specific. Using data on manufacturing industries in Canada and the United States, the paper shows that the correlation between cross-border pairings of the same industry are more often highly correlated than previously thought. In addition, the paper confirms earlier findings that the similarity of input use can help describe the co-movement of productivity fluctuations across industries.
Topic:
Economics, Industrial Policy, and Science and Technology
Political Geography:
United States, Canada, and North America

126. Breaks in the Variability and Co-Movement of G-7 Economic Growth

Author:
Jon Faust and Brian M. Doyle
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper investigates breaks in the variability and co-movement of output, consumption, and investment in the G-7 economies. In contrast with most other papers on co-movement, we test for changes in co-movement allowing for breaks in mean and variance. Despite claims that rising integration among these economies has increased output correlations among them, we find no clear evidence of an increase in correlation of growth rates of output, consumption, or investment. This finding is true even for the United States and Canada, which have seen a tremendous increase in bilateral trade shares, and for the members of the euro area in the G-7.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States, Canada, and North America

127. Interest Rate Rules and Multiple Equilibria in the Small Open Economy

Author:
Luis-Felipe Zanna
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In a small open economy model with traded and non-traded goods this paper characterizes conditions under which interest rate rules induce aggregate instability by generating multiple equilibria. These conditions depend not only on how aggressively the rule responds to inflation, but also on the measure of inflation to which the government responds, on the degree of openness of the economy and on the degree of exchange rate pass-through. As an important policy implication, this paper finds that to avoid aggregate instability in the economy the government should implement an aggressive rule with respect to the inflation rate of the sector that has sticky prices. That is the non-traded goods inflation rate. As a by-product of this analysis, it is shown that "fear-of-floating" governments that follow a rule that responds to both the CPI-inflation rate and the nominal depreciation rate or governments that implement "super-inertial" interest rate smoothing rules may actually induce multiple equilibria in their economies. This paper also shows that for forward-looking rules, the determinacy of equilibrium conditions depends not only on the degree of openness of the economy but also on the weight that the government puts on expected future CPI-inflation rates. In fact rules that are "excessively" forward-looking always lead to multiple equilibria.
Topic:
International Relations, Economics, Government, and International Trade and Finance

128. Productivity Growth and the Phillips Curve in Canada

Author:
Joseph W. Gruber
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This study examines the impact of productivity growth on the relationship between inflation and unemployment in Canada. Recently it has been suggested that higher productivity growth is responsible for a shift in the U.S. Phillips curve that occurred in the late 1990s. This paper examines whether the Phillips curve in Canada shifted in a manner similar to that of the United States, and the degree to which higher productivity growth explains this shift.
Topic:
International Relations, Economics, and Industrial Policy
Political Geography:
Canada and North America

129. The High-Frequency Response of Exchange Rates and Interest Rates to Macroeconomic Announcements

Author:
John H. Rogers, Jonathan H. Wright, Jon Faust, and Shing-Yi B. Wang
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Many recent papers have studied movements in stock, bond, and currency prices over short windows of time around macro announcements. This paper adds to the announcement effects literature in two ways. First, we study the joint announcement effects across a broad range of assets--exchange rates and U.S. and foreign term structures. In order to evaluate whether the joint effects can be reconciled with conventional theory, we interpret the joint movements in light of uncovered interest rate parity or changes in risk premia. For several real macro announcements, we find that a stronger than expected release appreciates the dollar today, but that it must either (i) lower the relative risk premium for holding foreign currency rather than dollars, or (ii) imply considerable future expected dollar depreciation. The latter implies an overshooting behavior akin to that described by Dornbusch (1976). Second, we use a longer span of high frequency data than has been common in announcement work. A longer span of high frequency data contributes to the precision of our estimates and allows us to explore the possibility that the effects of macro surprises on asset prices have varied over time. We find evidence, for example, that PPI releases had a larger effect on U.S. interest rates before about 1992 than subsequently.
Topic:
International Relations, Economics, Government, and International Trade and Finance
Political Geography:
United States

130. Market Power and Inflation

Author:
David Bowman
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the extent to which a decline in market power could have contributed to the general decline in inflation rates experienced in developed countries during the 1990s.
Topic:
International Relations, Economics, Government, and International Trade and Finance