International Trade,Hedging, and the Demand for Forward Contracts*

One of the main results of the literature on the effects of uncertainty on trade states that uncertainty should not matter in the presence of well‐developed forward markets. Empirical studies, however, do not support this result. We derive the demand for forward cover in a small open economy with terms‐of‐trade uncertainty. Adopting a standard and more realistic decision structure than the one usually used in this literature, we find that risk‐averse agents will not buy forwards at an unbiased price. Agents treat forward contracts as an asset rather than as an insurance. This is the reason why, when calibrating the model, only 17% of imports are covered by forwards.     

Globalization,Wage Volatility,and the Welfare of Workers*

This paper analyzes the effects of trade liberalization on the level and volatility of factor returns, in a model with identical technologies across industries and industry‐specific uncertainty. The results show an increase in the return to capital and, under certain conditions, a decline in the real wages and welfare of workers, along with an expansion of wage dispersion and volatility. Unlike the Solper–Samuelson mechanism, our results do not depend on the factor intensity of imports and exports and are borne out by all patterns of trade, including among industrialized countries, suggesting that the traditional analysis has missed some important linkages between trade and wages.     

The Effect of Exchange Rate Volatility on Trade in Durables

Because durable goods have the quality of an asset, risk-averse consumers wan to pay a lower price for durable than for nondurable goods so that they are compensated for the risk of price changes; they require risk premium. Since the exchange rate is a strong source of uncertainty in import prices, exchange rate volatility has a negative effect on the demand for imported durables. In an imperfectly competitive market, the volatility of the exchange rate is predicted to reduce the relative price of imported durables. The prediction is supported by an empirical investigation of US imports.     

Tariffs,Quality Choice,and Cost Functions: a Foreign Monopoly Case*

It has been shown that trade restrictions such as tariffs, import quotas, and voluntary export restrictions, lead to quality upgrading of imports. In this paper, however, we reconsider this proposition by focusing on the nature of cost functions. Based on a standard vertical differentiation model, we analyze the effects of tariffs on quality and quantity of imports. We show that if a fixed cost is an increasing function of quality, tariffs lead to quality downgrading of imports. Moreover, we discuss minimum quality requirements (MQR) for such a trade policy. We show that MQR increases the amount of imports and an importing country's welfare in the presence of the fixed cost function. These issues will be addressed in the context of a foreign monopoly.     

Does the exchange rate matter to bilateral trade between Korea and Japan? Evidence from commodity trade data

This study examines the short- and long-run effects of exchange rate changes on trade flows in the context of disaggregating industry data of bilateral trade between Korea and Japan. For this purpose, an autoregressive distributed lag (ARDL) approach is used. Results show that Korea's exports and imports are relatively sensitive to the bilateral exchange rate in the short-run, but less responsive in the long-run. It is also found that income in the two countries has significant impacts on the bilateral trade flows in both the short- and long-run. Finally, exchange rate uncertainty and Japanese FDI to Korea are found to have little impacts on Korea's trade with Japan in the short- and long-run.     

Exchange rate uncertainty and import prices in the euro area

This paper analyzes the effects of exchange rate uncertainty on the pricing behavior of import firms in the euro area. Uncertainty is measured via the volatility of the structural shocks to the exchange rate in a nonlinear vector‐autoregressive model framework and is an important determinant of import prices. An increase in exchange rate uncertainty is associated with a fall in prices on average, which suggests that the exchange rate risk is borne by the importers. Controlling for the origin of imports (within or outside the euro area) is important for assessing the impact of exchange rate movements on prices.     

Globalization,Ownership Structures and Productivity Dispersion

We investigate the heterogeneous effects of productivity dispersion on firms' organizational choices, depending upon sectoral characteristics. Using trade data on imports from non‐related parties (outsourcing) and related parties (integration) in the South, we show that productivity dispersion would increase imports from the South with outsourcing in the low headquarter intensity sector, along with an increasing fraction of the intra‐firm imports in the high headquarter intensity sector, which is consistent with the predictions from the theory. Considering the bounded nature of a share of the intra‐firm imports, a quasi‐maximum likelihood estimation was used.     

Technology import,secondary innovation,and industrial structure optimization: A potential innovation strategy for China

To enhance people’s lives, China needs to maximize the opportunities of technological changes and conduct innovations to optimize its industrial structure in the context of intellectual property rights (IPR) protection. The present paper analyses how industrial structure can be optimized by considering technology imports and innovations, and proposes an innovation strategy for China. We decompose imported technology into embodied technology imports (ETI) and disembodied technology imports (DTI). We found that ETI and DTI have negative effects on industrial structure rationalization and supererogation. Moreover, secondary innovations based on ETI depress industrial rationalization and supererogation, while secondary innovations based on DTI contribute positively. Therefore, DTI should be valued and the absorption of introduced technology improved. It is important to choose the appropriate mode of technology imports, to coordinate on the ratio of technology imports to secondary innovations, and to enhance the absorption of imported technology with the gradual improvement of IPR protection.     

Money growth,uncertainty and macroeconomic activity: a multivariate GARCH analysis

The impact uncertainty has on money growth has received much attention in recent years and is an issue of critical importance to central banks, particularly for those, such as the European Central Bank (ECB), which place a strong emphasis on monetary analysis in monetary policy formulation. Some recent papers examining this issue use ad hoc estimates and measure variability rather than uncertainty. We employ a multivariate GARCH model, which measures uncertainty by the conditional variance of the data series, to investigate whether macroeconomic uncertainty and monetary uncertainty Granger-cause changes in real money. The estimated model also allows us to investigate how monetary uncertainty impacts economic activity. We find that macroeconomic uncertainty impacts positively on US real M2 growth over a two-year horizon but that monetary uncertainty does not cause changes in real M2. Instead, our results indicate that real money growth causes monetary uncertainty. Monetary uncertainty is found to have a negative effect on real economic activity and on macroeconomic uncertainty. We conclude by discussing the implications of these results and the methodological approach used for institutions such as the ECB that give monetary analysis a prominent role in their monetary policy strategy.     

Trade flows,relative prices,and effective exchange rates: a VAR on Ethiopian data

The dynamic response of trade flows to price and effective exchange rate changes is examined via VAR using quarerly data from Ethiopia for the period 1973(i)–1985(iv). The results show one-way Granger-causality running from prices and exchange rates to imports and exports without significant feedback. Imports and exports exhibit similar response patterns to unexpected changes in relative prices and exchange rates. The responses of imports and exports are larger and the adjustment takes longer when relative prices rather than exchange rates caused a change in international prices. In the long-run, changes in prices account for a larger percentage of the forecast error variances in imports and exports than exchange rate changes. It is shown that devaluation may have an initial adverse effect on the trade balance.     

Liberalisation,Exports and Growth in Mexico 1978‐94: A structural analysis

In this paper, the results of an exports led growth strategy accompanied by a trade liberalisation policy, implemented in Mexico, are analysed for three periods 1978-82, 1983-87 and 1988-94. The input-output analysis is utilised, to determine the effects of manufacturing exports on gross output, to measure the degree of the global integration of the economy and, in particular, to measure the integration of the leading exporting manufacturing industries to domestic industries. The effects of liberalisation on increasing imports and the displacement of domestic production by imports, in manufacturing, are also measured and analysed. The general results of this analysis allowed us to conclude that the positive effect of increasing manufacturing exports on expanding production is limited and offset by the increasing manufacturing imports displacing domestic production. The increasing imports are mainly inputs demanded by growing exports.     

The end of import-led growth? Some observations on Soviet,Polish, and Hungarian experience in the 1970s

This paper presents an assessment of the performance of the Soviet, Polish and Hungarian economies during the 1970s in utilizing imports of Western capital goods and the technologies embodied in them to raise exports to the West. Trade data grouped by branch user (imports) and branch of origin (exports) are used. None of the three countries performed well on this test but balance-of-payments outcomes differed substantially. Differences between the three countries, it is suggested, derive from differences in policies, resource endowments and economic size, as well as (to a limited extent) from systemic factors.     

Exports,Imports and Income in Taiwan: An Examination of the Export Led Growth Hypothesis

Cointegration and vector autoregression are used to examine relationships among exports, imports, and income in Taiwan from 1971 to 1995. These three series are cointegrated. There is bidirectional Granger causality between exports and imports, and between imports and income. Impulse responses and variance decompositions uncover only weak links from exports to income. The export led growth hypothesis is not supported for Taiwan during this period of rapid growth. [F1, F4, O0]     

Long-Period Trade Elasticities for Canada, Japan, and the United States

Most analyses of imports use brief, postwar samples and offer a large range of elasticity estimates suggesting that the role of income and prices in determining imports is not known with any precision. This paper offers an analysis of that role using data since 1890 for Canada, Japan, and the United States. The elasticities of the log–linear model are estimated and found to be inconsistent with the view that income and prices affect imports. Optimization models are considered and found to predict secular changes in income and price elasticities and explain the dispersion of estimates of the literature.     

中国扩大进口中高档消费品可行性分析

目前中高档消费品已成为消费升级的重要对象",十二五"规划纲要首次提出要适当扩大消费品进口。基于科学发展观、全球新竞争理念及全新开放战略的"顶层设计",通过对扩大进口中高档消费品的理念、福利及条件等研究与分析后发现,中国具备扩大进口中高档消费品的条件,扩大进口中高档消费品是关乎国民福利的重要举措。     

EU participation and the external trade of Greece: an appraisal of the evidence

This paper investigates the trade effects caused by the accession of Greece to the EU. A large part of the analysis is in terms of trade flows disaggregated by the 21 categories of the Greek Tariff Schedule. These series are original data sets which have been constructed by the author to be used here for the first time. The main message is that after 1981 events took a turn closer to the pessimistic pre-accession predictions. Our findings indicate that during the post-integration period the external trade of Greece has been reoriented towards the EU countries and Greece lost part of its comparative advantage in those sectors in which such an advantage exists. We also suggest that as far as imports are concerned, EU participation has caused gross trade creation for imports from the EU countries and gross trade diversion for imports from the Rest of the World. As far as exports are concerned, the results indicate that EU participation has caused only a modest increase in Greek exports to the EU market.     

Is there an export or import-led productivity growth in rapidly developing Asian countries? a multivariate VAR analysis

In contrast to cross-country studies, the paper investigates the relationships between trade and labour productivity for nine rapidly developing Asian countries in a time-series framework using a vector error-correction model. Independent tests on the long-run and short-run relationship between trade variables of exports and imports and productivity are conducted. The results suggest that trade has an important impact on productivity and output growth in the economy, however it is imports that provide the important?‘virtuous’?link between trade and output growth. The results indicate that exports and imports have qualitatively different impacts on labour productivity. The long-run result shows that there is no causal effect from exports to labour productivity growth for Hong Kong, Indonesia, Japan, Taiwan and Thailand; thereby suggesting that there is no export-led productivity growth in these countries. However, significant causal effects were found from imports to productivity growth, suggesting import-led productivity growth in India, Indonesia, Malaysia, Philippines, Singapore and Taiwan. In addition, the results indicate that imports tend to have greater positive impact on productivity growth in the long run.     

Vertically related markets, tariffs, and technology adoption

This study considers the effect of trade policy on the time of technology adoption. Home firm is dependent on a foreign vertically integrate firm for supplies of a key input before the technology adoption and can produce the intermediate input after the technology adoption. Both firms compete by Cournot in the home final product market. I show that the decrease in the tariff on final product imports and the increase in the tariff on input imports create incentives for earlier technology adoption by home firm. While maximizing the discounted sum of welfare, the domestic government should protect home firm initially. Further, provided the cost of technology adoption declined sufficiently over time, the domestic government should stimulate the earlier technology adoption by decreasing the tariff on final product imports and increasing the tariff on intermediate product imports.     

International trade,secondary output and concentration in Canadian manufacturing industries, 1979

Census concentration measures do not account for either secondary output or imports. Taking these into account, for Canada in 1979, shows that measured concentration substantially overstates the degree to which a small number of firms controls a large proportion of industry output. Correcting for imports has a much greater effect than correcting for secondary output. These results are much more apparent in national than regional industries. On the other hand, taking into account exports has virtually no effect on estimates of concentration. These findings strengthen, as well as throw additional light on earlier work for the UK and Canada, which made ad hoc corrections to census concentration measures.     

Shaken,Not Stirred: The Impact of Disasters on International Trade

This paper examines the impact of major disasters on import and export flows using a gravity model (170 countries, 1962–2004). As a conservative estimate, an additional disaster reduces imports on average by 0.2% and exports by 0.1%. Despite the apparent persistence of bilateral trade volumes, we find that the driving forces determining the impact of disastrous events are the level of democracy and the geographical size of the affected country. The less democratic and the smaller a country the greater is its loss due to a catastrophe. In autocracies, exports and imports are significantly reduced. Had Togo been struck by a major disaster in 2000, it would have lost 6.2% of its imports and 3.7% of its exports. While democratic countries' exports suffer identical decreases, imports increase.