This paper investigates the cross‐border propagation of U.S. monetary policy shocks to the financial markets of five open countries—Australia, Canada, New Zealand, South Korea, and the United Kingdom—from 2000 to 2017. I estimate the structural VAR models that consist of multiple high‐frequency financial variables, in which the impacts of foreign (U.S.) and local monetary policy shocks are estimated

We investigate the effects of trade policy uncertainty on the entry decisions of exporters into Arab League markets. Using a product‐level dataset on World Trade Organization members exporting to Arab League countries for the years 1998–2015, we provide empirical evidence that trade policy uncertainty, a result of significant gaps between tariff bindings and applied tariffs (“tariff water”), led to

What drives the resilience of international trade against increasingly destructive natural disasters? In this study, I investigate the dynamics and spatial distribution of Hurricane Katrina's trade effects across United States infrastructure and break new ground on the mechanisms underlying the static and dynamic trade resilience. Analyzing port‐level data, I find that ports subject to this calamity

This paper analyzes environmental concerns by a government in a setting of rent‐extracting strategic trade policy with endogenous firm investment into production technologies. The simple analysis reinforces the importance of investment incentives caused by tariffs in general and shows that the resulting implications for the optimal tariff decision can be completely different between traditional tariff

We study the reaction of non‐exporters to openness. While static models suggest non‐exporters lose from openness, dynamic ones where firms can innovate allow for gains from internalizing future exports. Developing a tractable model with productivity choices where both effects are present, we show analytically that the former effect dominates for small non‐exporters, while the latter dominates for large

We study the impact of exogenous terms‐of‐trade shocks in a large sample of small open economies. Using a panel vector autoregression, we estimate the response of domestic variables including the exchange rate, output, exports, imports, and domestic demand, allowing impulse responses to vary according to the de facto exchange rate regime. We find strong evidence that flexible exchange rate regimes

This paper shows that investor‐state dispute settlements (ISDS) make multinational firms more aggressive by increasing cost‐reducing investments with the aim to enlarge the potential compensation an ISDS provision may offer. While a larger investment reduces the market distortion, it will also make potential compensations larger. Consequently, potential compensations to a foreign investor do not imply

This paper uses Bayesian methods to estimate the European (Monetary) Union effect on trade. The high dimensionality of the parameter space when estimating gravity equations with many dummy variables results in standard hypothesis tests with a large Type I (false positive) error. Bayesian methods are able to handle this problem; they also provide a principled method of model selection that can be applied

Business cycle synchronization (BCS) is crucial for effective common monetary policy in the Eurozone. However, the impact of capital market integration on BCS is ambiguous in the literature. In this paper, we quantify the different channels through which capital mobility affects BCS, considering dynamic panel framework accounting for model uncertainty, reverse causality, and contagion. Four different

This paper explores a role for capital control policies in enhancing a sovereign’s commitment to repay its debts. I study the equilibrium of an economy in which a sovereign must finance some expenditure, is constrained by the savings decisions of domestic households, and cannot discriminate between foreign and domestic lenders. I show that capital controls are crucial for implementing an equilibrium

The debate on trade and currency wars has reemerged since the Global Financial Crisis. We study the two forms of noncooperative policies within a single framework. First, we compare the elasticity of trade flows to import tariffs and to the real exchange rate, based on product‐level data for 110 countries over the 1989–2013 period. We find that a 1% depreciation of the importer's currency reduces imports

This paper examines the linkages between the trade of goods and financial assets. Do both flows behave as complements (implying a positive correlation) or as substitutes (negative correlation)? Although a classic topic in international macroeconomics, the empirical evidence has remained relatively scarce so far, in particular for the Euro area where trade and financial imbalance played a prominent

This paper analyses the role played by vertical linkages on the effects of trade liberalization on technology upgrading, average productivity, and welfare in a model of trade with heterogeneous firms. We find that the strength of vertical linkages shapes the effects that trade liberalization produces on firms’ survival and technology upgrading decisions, having an impact on the average productivity

This paper studies the role of global input–output linkages in transmitting economic disturbances in the international economy. Our empirical results find that these links are both statistically significant and of economic importance for generating spillovers. We also provide evidence that it is not the inter‐linkages per se that matter for the international transmission but rather the presence of

Contrary to conventional wisdom, this paper shows that a high‐wage economy can paradoxically reduce its level of aggregate unemployment by engaging in international trade with a low‐wage country. We demonstrate this possibility after introducing a minimum wage into the basic specific‐factor model (with immobile capital and mobile labor), even though the opposite result is known to arise in the longer‐run

Using a newly compiled and comprehensive database from International Financial Statistics, and applying panel‐regression techniques, this paper documents the evolution of households’ and firms’ dollarization over the past decade and assesses its macroeconomic determinants. Households’ and firms’ dollarization have much in common. Structural factors are more relevant than macroeconomic stability. Regarding

Since the end of the Bretton Woods system, promoting capital account liberalization has been one of the tenants of the IMF. Capital account liberalization was deemed one of the 10 pillars of what was often dubbed the “Washington Consensus.” Yet, things changed drastically with the Global Financial Crisis of 2008. From 2009 to 2012, comments from top IMF officials and staff reports displayed quite clearly

As consumers in countries around the world become increasingly aware of and sensitive to the products that their foreign counterparts consume, a natural question is what predictions do classic trade frameworks hold when incorporating social comparison‐based preferences? We analyze this question in a general equilibrium framework for a two‐country, two‐good world, in which the gap between domestic and

This research explores the question of which exchange rate regime would bring about better output and price stability, given the initial conditions and the external shocks facing Argentina’s economy in 2001–2002. Our analytical model incorporates a transmission mechanism, the balance‐sheet effects, which formulates the possible interaction between foreign debt and exchange rate policy. We find that

We investigate international investment income flows in 26 emerging market countries during the period of 1998–2015. Net investment income registered a deficit for this group of countries of between 2% and 3% of GDP during this period. This deficit has been dominated by payments on foreign direct investment liabilities, which is consistent with the change in the composition of the external liabilities

Regional economies in emerging countries vary greatly in terms of their global integration. External shocks, therefore, require adjustment mechanisms that reflect local conditions. This paper focuses on the role of real exchange rates (RER) in the economic performance of regions. In particular, we use monthly data to construct RER for 77 Russian regions over the period 2000–2016. The results validate

Research attention to current account imbalances increases because this problem is now manifested as intensified trade wars between countries. Our paper revisits this global issue from a new perspective complementary to previous studies. We propose a simple economics model and find that the current account balance is related inversely to the ratio of income to consumption inequality. This ratio synthesizes

While researchers agree that dividend and interest payments respond to tax treaties, evidence of the magnitude of this response remains scarce. We combine data from the International Bureau of Fiscal Documentation and the International Monetary Fund in a set of 65,000 annual country‐pair observations for the 2009–2016 period. We estimate dividend flows to be highly elastic in a cross‐country regression

In the 2000s, the United States signed free trade agreements (FTAs) with several Latin American countries. These treaties were among the first to contain specific chapters on telecommunications, which seek to promote competition and foreign investment in this market. This paper uses a difference‐in‐differences econometric strategy to evaluate the impact of these exogenous reforms in the telecommunications

By using the feature that money can lower unit transaction costs, this paper develops a monetary endogenous growth model for a one‐sector small open economy, and uses it to examine the possibility of the occurrence of belief‐driven fluctuations. It is found that the emergence of belief‐driven fluctuations is crucially related to targeting rules for monetary policy. More specifically, when the monetary

We examine whether higher productivity of a foreign firm increases the incentive for a cross border merger, which is a dominant form of foreign direct investment in recent decades. In line with the empirical evidence, we show that the relationship between productivity of a foreign firm and cross border merger is mixed. We show that the market concentration effect plays an important role in determining

Shortly after Edward E. Leamer found that the Leontief Paradox was based on a simple conceptual misunderstanding in 1980, Richard A. Brecher and Ehsan U. Choudhri in their 1982 article argued that the fact that the United States exported labor services was, in itself, paradoxical because it is true if and only if its per capita consumption is less than the world average. Surprisingly, however, no formal

This paper explores the transmission of US monetary policy through US banks to emerging market economies (EMEs) and the role that stress tests play in this transmission. Data on US banks’ monthly commercial and industrial loan originations shows that: (a) US bank lending to EMEs was sensitive to domestic monetary policy changes during the zero‐lower bound period. (b) Effects of monetary easing were

This paper presents the main findings of an International Banking Research Network initiative examining the interaction between monetary policy and macroprudential policy in determining international bank lending. We give an overview on the data, empirical specifications and results of the seven papers from the initiative. The papers are from a range of core and smaller advanced economies, and emerging

This paper explores how foreign capital flows affect domestic long‐term interest rates. This is especially important in emerging economies when compared with advanced economies. We employ panel data to infer the yields of 10‐year government bonds along with the government bond inflows associated with foreign investors. We then use a regression approach to examine the differences in the interest rate

This paper examines whether the increased use of macroprudential policies since the global financial crisis has affected the impact of (euro‐area and foreign) monetary policy on mortgage lending in Ireland and the Netherlands, which are both small open economies in the euro area. Using quarterly bank‐level data on domestic lending in both countries for 2003–2018, we find that restrictive euro‐area

I use bilateral trade data from a variety of countries to decompose the patterns of trade growth across various goods classifications during episodes of rapid growth in bilateral trade. I find that bilateral trade growth during these episodes is fragmented—less than 5% of goods classifications account for over 65% of overall bilateral trade growth. I quantitatively assess whether “Melitz‐style" trade