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Whatever-it-takes policymaking during the pandemic J. Int. Econ. (IF 3.712) Pub Date : 2024-03-13 Kathryn M.E. Dominguez, Andrea Foschi
Central banks across the globe introduced large-scale asset purchase programs to address the unprecedented circumstances experienced during the pandemic. Many of these programs were announced as open-ended to shock-and-awe market participants and restore confidence in financial markets. This paper examines whether these whatever-it-takes announcements had larger effects than announcements with explicit
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Banking regulation with risk of sovereign default J. Int. Econ. (IF 3.712) Pub Date : 2024-03-11 Pablo D’Erasmo, Igor Livshits, Koen Schoors
Banking regulation routinely designates domestic government debt as safe, even when this debt is risky. We show, in a parsimonious model, that this failure to recognize the riskiness of government debt induces domestic banks to “gamble” with depositors’ funds by purchasing risky government bonds and assets correlated with them. Sovereign defaults then result in banking crises but, by permitting banks
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On regional borrowing, default, and migration J. Int. Econ. (IF 3.712) Pub Date : 2024-03-11 Grey Gordon, Pablo Guerron-Quintana
How do local government borrowing, default, and migration interact? We find in-migration results in excessive debt accumulation due to a key externality: Immigrants help repay previously-issued debt. In addition to providing direct IV evidence on this mechanism, we show cities are heavily indebted, near state-imposed borrowing limits, vulnerable to interest rate increases, and default even after periods
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Heteroskedastic supply and demand estimation: Analysis and testing J. Int. Econ. (IF 3.712) Pub Date : 2024-03-06 Matthew Grant, Anson Soderbery
The Feenstra (1994) method is widely used in the international trade literature to estimate supply and demand elasticities. The method is mechanically an IV strategy, and we demonstrate that this has important implications for its application and reliability. The assumptions needed for it to yield unbiased estimates are stronger than previously understood, and in practice, estimates are subject to
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Accounting for trade patterns J. Int. Econ. (IF 3.712) Pub Date : 2024-03-05 Stephen J. Redding, David E. Weinstein
We develop a quantitative framework for decomposing trade patterns. We derive price indexes that determine comparative advantage and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average appeal (including quality), and the dispersion of appeal-adjusted prices. We show that they are only weakly related to standard empirical
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Preemptive austerity with rollover risk J. Int. Econ. (IF 3.712) Pub Date : 2024-03-04 Juan Carlos Conesa, Timothy J. Kehoe
By , we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up, because the policy eliminates the danger. Mechanically, high taxes make the safe zone in the model – the set of sovereign debt levels for which the government prefers to repay its debt rather than
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Unveiling the dance of commodity prices and the global financial cycle J. Int. Econ. (IF 3.712) Pub Date : 2024-03-01 Luciana Juvenal, Ivan Petrella
We examine the impact of commodity price changes on the business cycles and capital flows in emerging markets and developing economies (EMDEs), distinguishing between their role as a source of shock and as a channel of transmission of global shocks. Our findings reveal that surges in export prices, triggered by commodity price shocks, boost domestic GDP, an effect further amplified by the endogenous
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The Laffer curve for rules of origin J. Int. Econ. (IF 3.712) Pub Date : 2024-03-01 Keith Head, Thierry Mayer, Marc Melitz
Firms in regional trade areas choose whether to comply with rules of origin (RoO) or pay a tariff penalty. Stricter content requirements initially expand regional part sourcing, but contract it when set at levels above a threshold, analogously to the Laffer curve for taxes. We calibrate the model to fit part cost shares for autos sold in North America. The effects of the 75% RoO imposed in 2020 depend
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Sovereign debt and economic growth when government is myopic and self-interested J. Int. Econ. (IF 3.712) Pub Date : 2024-02-28 Viral V. Acharya, Raghuram G. Rajan, Jack B. Shim
We examine how a sovereign’s ability to borrow abroad affects the country’s growth and steady-state consumption when the government is both myopic and self-interested. Surprisingly, government myopia can increase a country’s access to external borrowing and extend the government’s effective horizon, giving it a stake in incentivizing private production and savings despite its self-interest. In a high-saving
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Quantifying the Germany shock: Structural labor-market reforms and spillovers in a currency union J. Int. Econ. (IF 3.712) Pub Date : 2024-02-23 Harald Fadinger, Philipp Herkenhoff, Jan Schymik
We examine the effects of unilateral structural reforms within a currency union. Focusing on the surge of German competitiveness following the introduction of the Euro, we first provide reduced-form causal evidence supporting the notion that German structural labor-market reforms in the early 2000s led to a crowding-out of manufacturing employment in other Eurozone economies. To assess the impact of
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Nonbank lenders as global shock absorbers: Evidence from US monetary policy spillovers J. Int. Econ. (IF 3.712) Pub Date : 2024-02-23 David Elliott, Ralf R. Meisenzahl, José-Luis Peydró
We show that nonbank lenders act as global shock absorbers from US monetary policy spillovers. For identification, we exploit monetary policy surprises and the global syndicated lending market, where detailed loan-level data allow us to compare the participation of banks and nonbanks in the same loan. When US policy tightens, dollar credit to non-US firms falls, but nonbanks increase credit supply
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International transmission of the U.S. dollar liquidity shock: The channel of FX borrowing and lending J. Int. Econ. (IF 3.712) Pub Date : 2024-02-22 Youngju Kim, Hyunjoon Lim, Youngjin Yun
Access to foreign exchange (FX) liquidity is crucial to the growth and stability of emerging market economies. We examine the impact of U.S. dollar liquidity shocks on firm investments in Korea by constructing a dataset that merges four distinct micro-level data spanning ten years from 2006 to 2015. We trace the path of FX liquidity from the international financial market to Korean banks and subsequently
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Capital Controls and Firm Performance J. Int. Econ. (IF 3.712) Pub Date : 2024-02-20 Eugenia Andreasen, Sofía Bauducco, Evangelina Dardati
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A theory of economic sanctions as terms-of-trade manipulation J. Int. Econ. (IF 3.712) Pub Date : 2024-02-09 John Sturm Becko
How can a country design economic sanctions to maximize their economic cost to the sanctioned country at the lowest cost to the sanctioner? I consider this problem from the perspective of international trade and draw a close connection between trade restrictions as economic sanctions and trade restrictions as terms-of-trade manipulation. This connection has useful implications for the design of trade
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The international dimension of trend inflation J. Int. Econ. (IF 3.712) Pub Date : 2024-02-06 Guido Ascari, Luca Fosso
A trend-cycle BVAR decomposition investigates the role of different slow-moving trends – i.e., globalization, expectations, automation, labor demand and supply – in shaping the slow-moving dynamics of trend inflation. Despite well-anchored expectations, slow-moving imported “cost-push” factors induced disinflationary pressure keeping trend inflation below target. The cycle block provides evidence of
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Sovereign debt crises and low interest rates J. Int. Econ. (IF 3.712) Pub Date : 2024-02-02 Gaetano Bloise, Yiannis Vailakis
We revisit the occurrence of self-fulfilling crises in sovereign debt markets under time-varying interest rates and growth in Eaton and Gersovitz (1981)’s model. We show that, when long-term interest rates exceed growth, insolvency is solely caused by the exhaustion of the sovereign’s debt repayment capacity subject to limited commitment. Indeed, high interest rates impose discipline on market sentiments
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Sudden Stops and optimal policy in a two-agent economy J. Int. Econ. (IF 3.712) Pub Date : 2024-02-02 Nina Biljanovska, Alexandros P. Vardoulakis
We introduce heterogeneity between workers and entrepreneurs in a standard Fisherian model to study Sudden Stop dynamics and optimal policy. The distinction between workers and entrepreneurs introduces a redistributive motive that meaningfully interacts with Fisherian deflation. While in tranquil times redistribution is driven by the relative marginal utilities of consumption, the planner additionally
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Offshoring and job polarisation between firms J. Int. Econ. (IF 3.712) Pub Date : 2024-01-30 Hartmut Egger, Udo Kreickemeier, Christoph Moser, Jens Wrona
Using linked employer–employee data for Germany, we provide evidence for job polarisation between firms and identify offshoring as an important determinant of these employment changes. To accommodate these findings, we set up a model in which offshoring to a low-wage country can lead to job polarisation in the high-wage country due to a reallocation of labour across firms that differ in productivity
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Sudden stop with local currency debt J. Int. Econ. (IF 3.712) Pub Date : 2024-01-17 Siming Liu, Chang Ma, Hewei Shen
Over the past two decades, emerging market economies have improved their liability structures by increasing the share of their debt denominated in local currency. This paper introduces a local currency debt (i.e., in units of aggregate consumption) into a sudden stop model and explores how this alternative structure sheds new perspectives on financial regulations. Decentralized agents do not internalize
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Did Trump’s trade war impact the 2018 election? J. Int. Econ. (IF 3.712) Pub Date : 2024-01-18 Emily J. Blanchard, Chad P. Bown, Davin Chor
We uncover evidence that the US–China trade war was consequential for voting outcomes in the 2018 congressional midterm election. Republican House candidates lost support in counties more exposed to tariff retaliation, but saw no appreciable gains in counties that received more direct US tariff protection. The electoral losses were only modestly mitigated by the US agricultural subsidies announced
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The internal geography of firms J. Int. Econ. (IF 3.712) Pub Date : 2024-01-18 Dominick Bartelme, Oren Ziv
We document that plants belonging to small and mid-sized firms are geographically concentrated, while large firms are much more dispersed. These differences are sizable; firms with 2 plants have a dispersion that is 5 log points lower than predicted by industry location patterns, while the corresponding figure is less than 2 log points for firms with 40 plants and less than a half log point for firms
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A rising tide? The local incidence of the second wave of globalization J. Int. Econ. (IF 3.712) Pub Date : 2024-01-12 Rowena Gray, Greg C. Wright
We estimate the short- and long-run local labor market impacts of the large increase in U.S. imports and exports that occurred over the 1970s. We exploit the sequential opening of overseas shipping container ports over the period, which generated export and import shocks that were largely non-overlapping across U.S. labor markets thereby providing substantial variation to distinguish their effects
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International migration and illegal costs: Evidence from Africa-to-Europe smuggling routes J. Int. Econ. (IF 3.712) Pub Date : 2024-01-11 Guido Friebel, Miriam Manchin, Mariapia Mendola, Giovanni Prarolo
The 2011 Arab Spring marked the opening of the Central Mediterranean Route for irregular border crossings between Libya and Italy, which produced heterogeneous reductions of bilateral smuggling distances between country pairs in the Mediterranean region. We exploit this source of spatial and temporal variation in bilateral distance along land and sea routes to estimate the elasticity of irregular migration
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Exchange rate pass-through in small, open, commodity-exporting economies: Lessons from Canada J. Int. Econ. (IF 3.712) Pub Date : 2024-01-11 Marco Flaccadoro
This paper analyses the exchange rate pass-through in small, open, commodity-exporting economies, taking Canada as a case study. I estimate it as being conditional on commodity shocks and compare the results with those of a standard approach, showing that the pass-through sign changes drastically across frameworks for consumer prices. My approach leads to a positive pass-through, thus implying a positive
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Foundation of the small open economy model with product differentiation J. Int. Econ. (IF 3.712) Pub Date : 2024-01-09 Lorenzo Caliendo, Robert C. Feenstra
We derive a small open economy (SOE) as the limit of an economy as the number or size of its trading partners goes to infinity and trade costs also go to infinity. We obtain this limit in the Armington, Eaton-Kortum, Krugman, and Melitz models. In all cases, the trade of the SOE with the foreign countries approaches a finite limit, and the domestic expenditure share for the SOE approaches a limit that
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Corrigendum to “Fundamentals news, global liquidity and macroprudential policy” [J. Int. Econ. 99 (2016) S1] J. Int. Econ. (IF 3.712) Pub Date : 2024-01-09 Javier Bianchi, Chenxin Liu, Enrique G. Mendoza
Abstract not available
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UIP deviations: Insights from event studies J. Int. Econ. (IF 3.712) Pub Date : 2024-01-08 Elias Albagli, Luis Ceballos, Sebastian Claro, Damian Romero
We evaluate the behavior of the UIP relationship around monetary policy and global uncertainty shocks using event studies. We find that the covariance between exchange rate movements and changes in long-term yield differentials is conditional on the nature of shocks. A model of partial arbitrage between domestic and US bond markets predicts that tighter US monetary policy appreciates the dollar while
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Corrigendum to “Capital flows and income inequality” [Journal of International Economics 144 (2023) 103776] J. Int. Econ. (IF 3.712) Pub Date : 2024-01-04 Zheng Liu, Mark M. Spiegel, Jingyi Zhang
Abstract not available
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The politics of redistribution and sovereign default J. Int. Econ. (IF 3.712) Pub Date : 2023-12-28 Almuth Scholl
This paper studies how distributional and electoral concerns shape sovereign default incentives within a quantitative model of sovereign debt with heterogeneous agents and non-linear income taxation. The small open economy is characterized by a two-party system in which the left-wing party has a larger preference for redistribution than the right-wing party. Political turnover is the endogenous outcome
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The costs and benefits of rules of origin in modern free trade agreements J. Int. Econ. (IF 3.712) Pub Date : 2023-12-28 Emanuel Ornelas, John L. Turner
Rules of origin offer preferred market access for final goods whose inputs originate mostly within a free trade agreement. Governments often champion such rules for boosting investment. We use a property-rights framework to study when this motivation is justifiable. The rule does not bind for all supply chains, as some (very-high-productivity) suppliers comply in an unconstrained way and some (very-low-productivity)
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Permanent and temporary monetary policy shocks and the dynamics of exchange rates J. Int. Econ. (IF 3.712) Pub Date : 2023-12-20 Alexandre Carvalho, João Valle e Azevedo, Pedro Pires Ribeiro
We show the distinction between permanent and temporary monetary policy shocks is helpful to understand the impacts of monetary policy on exchange rates in the short as well as over the long run. Drawing on monthly data for several advanced economies from 1971 to 2019 and resorting to a simple structural vector error correction (SVEC) model, we find that a shock leading to a temporary increase in U
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Introduction: NBER International Seminar on Macroeconomics 2022 J. Int. Econ. (IF 3.712) Pub Date : 2023-12-14 Jeffrey Frankel, Hélène Rey
Abstract not available
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International input–output linkages and changing business cycle volatility J. Int. Econ. (IF 3.712) Pub Date : 2023-12-15 Wataru Miyamoto, Thuy Lan Nguyen
We quantify the effects of changes in international input–output linkages on the nature of business cycles. We build a multi-country international business cycle model with manufacturing and non-manufacturing sectors that matches the input–output structure within and across countries. We find that, in our 23-country sample, changes in the international input–output linkages between 1970 and 2007 have
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How firms accumulate inputs: Evidence from import switching J. Int. Econ. (IF 3.712) Pub Date : 2023-12-07 Dan Lu, Asier Mariscal, Luis-Fernando Mejía
We uncover new dynamic facts in Colombian manufacturing importers’ data. First, imported input switching, a firm’s simultaneous adding and dropping of foreign intermediates, is pervasive and a substantial fraction of firm’s imports. Second, larger firms switch more conditional on age, whereas younger firms switch more conditional on size. Third, the number of imported varieties increases with firm
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Bound by ancestors: Immigration, credit frictions, and global supply chain formation J. Int. Econ. (IF 3.712) Pub Date : 2023-12-02 Jaerim Choi, Jay Hyun, Ziho Park
This paper shows that the ancestry composition shaped by century-long immigration to the US can explain the current structure of global supply chains. Using an instrumental variable strategy combined with a novel dataset that links firm-to-firm global supply chains with their location information and historical migration data, we find that the co-ethnic networks have a positive causal impact on global
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Supply chain risk: Changes in supplier composition and vertical integration J. Int. Econ. (IF 3.712) Pub Date : 2023-12-05 Nuri Ersahin, Mariassunta Giannetti, Ruidi Huang
Using textual analysis of earnings conference calls, we quantify firms' supply chain risk and explore how firms react when supply chain risk increases. We show that firms with supply chains that span across continents, multinationals, and firms with fewer suppliers of an input face higher supply chain risk. In addition, firms exhibit high supply chain risk when their suppliers also do so. Firms manage
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The boom of corporate debt in emerging markets: Carry trade or save to invest? J. Int. Econ. (IF 3.712) Pub Date : 2023-11-26 José De Gregorio, Mauricio Jara
The decline in international interest rates following the global financial crisis encouraged firms in emerging markets to increase their corporate bond issuance abroad. Evidence shows that issuing offshore debt increases cash holdings, suggesting firms may exploit interest rate arbitrage. We argue that increasing contemporaneous cash holdings may also be undertaken for a “save to invest” motive to
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You can’t always get what you want (where you want it): Cross-border effects of the US money market fund reform J. Int. Econ. (IF 3.712) Pub Date : 2023-11-25 Daniel Fricke, Stefan Greppmair, Karol Paludkiewicz
This paper documents significant cross-border effects of the 2014 US money market fund (MMF) reform on euro area MMFs. As US-based prime funds became less money-like due to the reform, euro area-based prime funds received large inflows from foreign investors. These cross-border flows were mainly motivated by the search for stable NAV instruments. Consistent with an easing of competitive pressure, euro
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Macroprudential policy for internal financial dollarization J. Int. Econ. (IF 3.712) Pub Date : 2023-11-18 Aleksei Oskolkov, Marcos Sorá
We study macroprudential policy aimed at domestic debt denominated in different currencies. We model a small open economy with entrepreneurs and workers who save and borrow in domestic and foreign currency. Financial frictions make dollar debt on entrepreneurs’ balance sheets especially disruptive when the exchange rate depreciates. Falling output causes additional depreciation; this amplification
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Reallocation and productivity in resource-rich economies J. Int. Econ. (IF 3.712) Pub Date : 2023-11-14 Rodrigo Heresi
I study the firm-level dynamic response of a commodity-exporting economy to global cycles in commodity prices. I propose a heterogeneous-firms model endogenizing manufacturing productivity slowdowns through reallocation towards less productive firms. Within a given sector, commodity booms reallocate market share away from exporters because of exchange rate appreciation and away from capital-intensive
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Endogenous production networks with fixed costs J. Int. Econ. (IF 3.712) Pub Date : 2023-11-10 Emmanuel Dhyne, Ayumu Ken Kikkawa, Xianglong Kong, Magne Mogstad, Felix Tintelnot
We develop a model of endogenous production networks with fixed costs in the formation of links between firms. We show that the closed economy equilibrium is unique if the set of feasible networks consists only of networks that are acyclic and the buyer initiates the link formation while having full bargaining power in price negotiations with the supplier. We provide examples of multiple equilibria
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Precautionary protectionism J. Int. Econ. (IF 3.712) Pub Date : 2023-11-09 Sharon Traiberman, Martin Rotemberg
We characterize optimal trade policy when there is a potential crisis: an increase in demand for goods produced abroad. In our model, comparative advantage is endogenous, as countries cannot start producing new goods after the shock. In anticipation, the optimal policy uses tariffs to encourage the production of more goods. For marginally competitive goods, the optimal policy trades off comparative
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Longevity and the value of trade relationships J. Int. Econ. (IF 3.712) Pub Date : 2023-11-08 Ryan Monarch, Tim Schmidt-Eisenlohr
More than 80 percent of U.S. imports occur in preexisting firm-to-firm relationships, and disruptions to them can have large and long-lasting effects. Using U.S. Census data, this paper shows that as importers and their suppliers transact repeatedly, traded quantities and survival probabilities rise. We develop a general equilibrium trade model with relationship dynamics that is consistent with these
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The international transmission of local economic shocks through migrant networks J. Int. Econ. (IF 3.712) Pub Date : 2023-11-02 María Esther Caballero, Brian C. Cadena, Brian K. Kovak
Using newly validated data on geographic migration networks, we study how labor demand shocks in the United States propagate across the border with Mexico. We show that the large exogenous decline in US employment brought about by the Great Recession affected demographic and economic outcomes in Mexican communities that were highly connected to the most affected markets in the US. In the Mexican locations
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Making sovereign debt safe with a financial stability fund J. Int. Econ. (IF 3.712) Pub Date : 2023-11-02 Yan Liu, Ramon Marimon, Adrien Wicht
We develop an optimal design of a Financial Stability Fund that coexists with the international debt market. The sovereign can borrow defaultable bonds on the private international market, while having with the Fund a long-term contingent contract subject to limited enforcement constraints. The Fund contract does not have ex ante conditionality, but requires an accurate country-specific risk-assessment
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Regulatory arbitrage and loan location decisions by multinational banks J. Int. Econ. (IF 3.712) Pub Date : 2023-11-05 Asli Demirgüç-Kunt, Bálint L. Horváth, Harry Huizinga
This paper examines the impact of international differences in capital regulation on multinational banks' loan origination location decisions. International loan location decisions represent a key banking margin that has previously not been examined in the literature on regulatory arbitrage by banks. Our estimation relies on within-loan contribution variation in location options for individual multinational
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Dollar invoicing, global value chains, and the business cycle dynamics of international trade J. Int. Econ. (IF 3.712) Pub Date : 2023-11-04 David Cook, Nikhil Patel
This paper reexamines the relationship between monetary policy, exchange rates and international trade in a world characterized by the dominant currency paradigm and global value chains. Using a three-country dynamic stochastic general equilibrium (DSGE) model, it documents key differences between the response of gross and value added trade flows to interest rate shocks, and offers a framework to test
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The global minimum tax raises more revenues than you think, or much less J. Int. Econ. (IF 3.712) Pub Date : 2023-10-31 Eckhard Janeba, Guttorm Schjelderup
The OECD’s global minimum tax (GMT) of 15% on what is deemed excess profit of multinationals aims to reduce profit shifting to low-tax jurisdictions. . We study the revenue effects of the GMT by focusing on strategic tax setting effects. The direct effect from less profit shifting increases revenues in high-tax countries. A secondary effect, however, is that the value of attracting foreign investments
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Mitigating information frictions in trade: Evidence from export credit guarantees J. Int. Econ. (IF 3.712) Pub Date : 2023-10-31 Natasha Agarwal, Jackie M.L. Chan, Magnus Lodefalk, Aili Tang, Sofia Tano, Zheng Wang
Information frictions make foreign trade risky. In particular, the risk of buyer default deters firms from selling abroad. To address this issue, many countries offer export credit guarantees to provide insurance to exporters. In this paper, we investigate the causal effects of guarantees by exploiting a quasi-natural experiment in Sweden and rich register data on guarantees, firms and trade. Estimates
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Determinants of global neutral interest rates J. Int. Econ. (IF 3.712) Pub Date : 2023-10-30 Thiago R.T. Ferreira, Samer Shousha
We provide a comprehensive account of the determinants of global longer-run neutral interest rates—the real component of policy interest rates consistent with both economic activity and inflation at their longer-run trends. Using a cross-country model for 11 advanced economies in the 1960–2019 period, we simultaneously account for productivity, demographics, global supply of safe assets, demand factors
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Global impacts of US monetary policy uncertainty shocks J. Int. Econ. (IF 3.712) Pub Date : 2023-10-29 Povilas Lastauskas, Anh Dinh Minh Nguyen
We build a new empirical model, which admits time-varying variances of local structural shocks, to estimate the global impact of an increase in the volatility of US monetary policy shocks. By allowing for rich dynamic interaction between the endogenous variables and time-varying volatility in the global setting, we find that US interest rate uncertainty not only drives local output and inflation volatility
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Unilateral tax policy in the open economy J. Int. Econ. (IF 3.712) Pub Date : 2023-10-14 Miriam Kohl, Philipp M. Richter
This paper examines the effects of a unilateral reform of a redistributive tax-transfer system in an open economy. Compared to autarky, a tax increase leads to a smaller decline in aggregate income in the open economy, and it is also more effective at reducing income inequality, provided the tax rates are sufficiently low. Aggregating effects on income and income inequality using an Atkinson social
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A second-best argument for low optimal tariffs on intermediate inputs J. Int. Econ. (IF 3.712) Pub Date : 2023-10-12 Lorenzo Caliendo, Robert C. Feenstra, John Romalis, Alan M. Taylor
We derive a new formula for the optimal uniform tariff in a small-country, heterogeneous-firm model with roundabout production and a nontraded good. Tariffs are applied on imported intermediate inputs. First-best policy requires that markups on domestic intermediate inputs are offset by subsidies. In a second-best setting where such subsidies are not used, roundabout production and the monopoly distortion
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Testing classic theories of migration in the lab J. Int. Econ. (IF 3.712) Pub Date : 2023-10-05 Catia Batista, David McKenzie
We test different classic migration theories by using incentivized laboratory experiments to investigate how potential migrants decide between working in different destinations. We assess theories of income maximization, skill-selection, and multi-destination choice, as we vary migration costs, risk, social benefits, and incomplete information. The standard income maximization model leads to a much
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The effects of countercyclical interest rates: Evidence from the classical gold standard J. Int. Econ. (IF 3.712) Pub Date : 2023-10-05 Kris James Mitchener, Gonçalo Pina
We estimate the impact of countercyclical interest rates on macroeconomic outcomes in open economies. To identify countercyclical interest rates, we construct a new database of short-term interest rates, principal exports, and commodity prices for 40 economies from 1870–1913. Specialization and trade integration subjected economies to a “commodity lottery” in the form of price fluctuations in world
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Robots, tasks, and trade J. Int. Econ. (IF 3.712) Pub Date : 2023-10-05 Erhan Artuc, Paulo Bastos, Bob Rijkers
We examine the effects of robotization on North–South trade patterns, wages and welfare. The empirical analysis uses ordinary least squares and instrumental-variable regressions exploiting variation in exposure to robots across countries and sectors. Both reveal that greater robot intensity in own production leads to: (i) a rise in imports sourced from less developed countries in the same industry;
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COVID-19 and emerging markets: A SIR model, demand shocks and capital flows J. Int. Econ. (IF 3.712) Pub Date : 2023-10-05 Cem Çakmaklı, Selva Demiralp, Şebnem Kalemli Özcan, Sevcan Yeşiltaş, Muhammed A. Yıldırım
We quantify the macroeconomic effects of COVID-19 for a small open economy. We use a two-country framework combined with a sectoral SIR model to estimate the effects of collapses in foreign demand and supply. The small open economy (country one) suffers from domestic demand and supply shocks due to its own pandemic. In addition, there are external shocks coming from the rest of the world (country two)
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Differential treatment in the bond market: Sovereign risk and mutual fund portfolios J. Int. Econ. (IF 3.712) Pub Date : 2023-09-21 Nathan Converse, Enrico Mallucci
How do international investors adjust their portfolios in response to sovereign risk? We answer this question by combining data on default probabilities for 31 developed and emerging markets with monthly data on the portfolios of individual bond mutual funds. We show that bond funds reduce their exposure to a country when sovereign default risk increases, indicating that changes in yields do not fully