Regional origins of employment volatility: evidence from German states

Greater openness for trade can have positive welfare effects in terms of higher growth. But increased openness may also increase uncertainty through a higher volatility of employment. We use regional data from Germany to test whether openness for trade has an impact on volatility. We find a downward trend in the unconditional volatility of employment, paralleling patterns for output volatility. The conditional volatility of employment, measuring idiosyncratic developments across states, in contrast, has remained fairly unchanged. In contrast to evidence for the US, we do not find a significant link between employment volatility and trade openness.     

MACROECONOMIC VOLATILITY AND INTERNATIONAL INTEGRATION

This paper explores the effects that varying degrees of international openness have on macroeconomic volatility. The analysis is conducted for a two‐symmetric‐country world under three levels of international integration: that of a closed economy, a financial autarky, and full financial integration. Different degrees of trade openness are considered in the form of home biases, while the economy is left vulnerable to total factor productivity and innovation shocks. Full financial integration is found to reduce firm‐size volatility and volatility in the mass of operative firms following a productivity shock and to increase them after an innovation shock. Moreover, the interaction between international sharing of profits and terms of trade transmissions determines the non‐linear behaviour of consumption‐to‐output ratio volatility found in empirical studies.     

Openness can be good for growth: The role of policy complementarities

This paper studies how the effect of trade openness on economic growth may depend on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris–Todaro model where welfare gains after trade openness depend on the degree of labor market flexibility. The paper then presents cross-country, panel-data evidence on how the growth effect of openness may depend on a variety of structural characteristics. For this purpose, the empirical section uses a non-linear growth regression specification that interacts a proxy of trade openness with proxies of educational investment, financial depth, inflation stabilization, public infrastructure, governance, labor market flexibility, ease of firm entry, and ease of firm exit. The paper concludes that the growth effects of openness may be significantly improved if certain complementary reforms are undertaken.     

Terms of trade volatility,government spending cyclicality,and economic growth

This paper presents estimates of the effects that terms of trade volatility has on real gross domestic product (GDP) per capita growth. Based on 5‐year nonoverlapping panel data comprising 175 countries during 1980 to 2010, the paper finds that terms of trade volatility has significant negative effects on economic growth in countries with procyclical government spending. In countries where government spending is countercyclical, terms of trade volatility has no significant effect on growth. Conditional on the mediating role of government spending cyclicality, the GDP share of domestic credit to the private sector has no significant effect on the relationship between growth and terms of trade volatility.     

Does a Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation

This paper assesses how regional trade agreements (RTAs) impact on growth volatility for a sample of 170 countries over the period 1978–2012. Notwithstanding concerns that trade openness through RTAs might heighten exposure to shocks, RTAs through enhanced policy credibility, improved policy coordination and reduced risk of conflicts can also ease growth volatility. Empirical estimations suggest the benefits outweigh the costs as RTAs are consistently associated with lower growth volatility. In addition, smaller economies benefit more from the reduced growth volatility associated with RTAs than larger ones. The nature of the RTA also matters as shallow agreements such as partial‐scope preferential trade agreements do not appear to have a significant effect on growth volatility, whereas free trade areas and customs unions do. Finally, in investigating the drivers of RTAs, the regression results confirm that countries that are more prone to shocks are more likely to join an RTA, in particular with countries with relatively less volatile growth.     

Analyzing exchange rate uncertainty and bilateral export growth in China: A multivariate GARCH-based approach

Dramatic changes to exchange rate policy for the world's largest exporter have arguably ushered in the optimal environment for studying the effects of exchange rate uncertainty on trade. This study builds on the recent literature by using an extremely general model that measures volatility using the flexible multivariate DCC-GARCH model to analyze the impact exchange rate uncertainty has on bilateral export growth for China's ten largest export markets. All model parameters are estimated simultaneously and lagged values of uncertainty are included for a full year, where significant effects are found. The more general methods potentially overcome issues associated with inefficient two-step methods and the assumption that volatility impacts are close to instantaneous. Using a comprehensive sample that spans 1994–2017, the paper presents evidence that exchange rate uncertainty has no impact on trade with the United States, which strongly contrasts a robust finding of trade deterring impacts for almost all remaining countries. The unifying methodology is also used to analyze nominal uncertainty itself. Here, it is found that Chinese inflation may be a positive contributor to risk in an environment where many exogenous events, such as the Asian currency crisis, are associated with periods of heightened yuan uncertainty.     

Globalization and inter‐industry wage differentials in China

This paper explores the relationship between globalization and inter‐industry wage differentials in China by using a two‐stage estimation approach. Taking advantage of a rich household survey dataset, this paper estimates the wage premium for each industry in the first stage conditional on individual worker and firm characteristics. Alternative measures of globalization are considered in the second stage: trade openness and capital openness. A disaggregation of trade into trade in final and intermediate goods shows that increases in import (export) shares of final goods reduce (increase) the wage premia significantly, whereas imports or exports of intermediate goods do not explain differences in industry wage premia. This finding is supported by stronger effects for final goods trade in coastal than noncoastal regions. Our results also show a positive relationship between capital openness and industrial wage premia, though this finding is less robust when potential endogeneity issues are allowed for.     

The export price index with the effect of variety and an empirical analysis

The standard international trade models predict that economic growth induces decreasing export prices. Korea has recorded sustainable economic and export growth, and its export prices have been deteriorating over the last decades. Unlike the standard assumption of one good per country, the new theoretical approach by Krugman [Krugman, P. (1980) ‘Scale Economies, Product Differentiation, and Pattern of Trade’. American Economic Review 70, 950–959, Krugman, P. (1989) ‘Differences in income elasticities and trends in real exchange rates’. European Economic Review, 33, 1055–1085.], and Helpman and Krugman [Helpman, E. and Krugman, P. (1985), Market structure and foreign trade: increasing returns, imperfect competition, and international economy, The MIT Press, Cambridge, MA.] takes into account varieties of goods produced in each country. And many studies suggest that traditional estimates without variety effect have been rather under-stated. Therefore this paper develops a proper modeling for quantifying the impact of export variety on an exact export price index. Throughout the period (1984–2000), the conventional export price index without variety effect leads to under-state Korea's export price by 89.3%. This paper shows that the fall in Korean export prices has been offset by the effect of export variety. This paper emphasizes the effect of export variety on international trade.     

Output volatility,composition of trade,and transmission of economic shocks across countries

In this paper we investigate how supply and demand shocks in one country affect output volatility in other countries. While the evidence for cross‐country transmission of demand shocks is mixed, we find that volatile supply in one country leads to larger imports and output volatility in other countries. As a result, the effect of trade openness on output volatility is highly heterogeneous across countries and depends on the composition of their trade. Those countries whose imports originate in economies with volatile supply experience a greater impact of trade on output volatility.     

Exchange‐Rate Risk and Japanese–Thai Industry Trade

Over the past decade, many papers have studied the effects of exchange‐rate volatility on international trade, particularly at the bilateral level for large numbers of individual industries. This is necessary because the underlying theory is ambiguous and because earlier papers failed to uncover significant results at a higher degree of aggregation. This paper examines the case of Japan and Thailand over the period from 1970 to 2010. We find that slightly more than half of 117 export industries and 54 import industries are affected by volatility in the short run. In the long run, 6 export and 2 import industries are affected positively, and 22 export and 9 import industries are affected negatively. Small Japanese export industries are more likely to be negatively affected, while imports show no differences regarding industry size. In a sectoral analysis, we find some evidence that Japanese exports of manufactures and certain machinery and transport equipment might be relatively more affected by the exchange‐rate risk. Raw material imports are least affected. These findings therefore suggest which industries might benefit most by a policy promoting a stable yen.     

Input-trade liberalization and firm export decisions: Evidence from Argentina

Trade openness contributes to the diffusion of the modern technologies embodied in imported intermediate goods, which play a central role in the economic growth of developing countries. This paper investigates the micro-economic effects of input-trade liberalization. Previous work has found positive effects of access to foreign inputs on firm performance. If the availability of imported intermediate goods yields firm productivity gains, we would also expect a positive effect of input-trade liberalization on firm export decisions. This paper contributes to this literature by looking at the relationship between changes in input tariffs and within-firm changes in export status. Using detailed firm-level data from Argentina, I demonstrate that the probability of entering the export market is higher for firms producing in industries that have experienced greater input tariff reductions. These empirical findings are robust to alternative specifications that control for other trade-policy reforms, and industry and firm characteristics.     

Free trade and economic growth: The role of talent diversity

To analyse the impact of the diversity of talent distribution on the equilibrium growth rate, this paper develops an equilibrium growth model with heterogeneous labor. We show that the growth effect after free trade depends on the diversity effect and the trade effect. In addition, we prove that if talent diversity is great enough then opening trade will stimulate economic growth. In contrast, if talent diversity is small enough then trade openness is detrimental to economic growth.     

Exchange rate volatility and international trade: International evidence from the MINT countries

This paper examines the effect of exchange rate volatility on international trade volumes for Mexico, Indonesia, Nigeria, and Turkey. We use volatility predicted from GARCH models for both nominal and real effective exchange rate data. To detect the long-term relationship we use the autoregressive distributed lag (ARDL) bound testing approach, while for the short-term effects, Granger causality models are employed. The results show that, in the long term, there is no linkage between exchange rate volatility and international trade activities except for Turkey, and even in this case, the magnitude of the effect of volatility is quite small. In the short term, however, a significant causal relationship from volatility to import/export demand is detected for Indonesia and Mexico. In the case of Nigeria, unidirectional causality from export demand to volatility is found, while for Turkey, no causality between volatility and import/export demand is detected.     

Is foreign trade important for regional growth? Empirical evidence from Portugal

The aim of this study is to investigate whether openness, export shares or trade balances affect regional growth in Portugal. Human capital is also considered as a conditional factor to growth, expressed by the rate of success in high school education. Thus, we analyse whether the combination of international trade and human capital is relevant to explain regional growth in Portugal and how it affects the convergence process between regions. In the empirical analysis, interaction terms are introduced to explore the existence of different performances between regions of the Littoral and the Interior. As an alternative to the traditional approach that considers the population growth rate, we include the share of sectoral employment aiming to capture labour specialisation in the main sectors of economic activity and measure its impact on regional growth.The empirical analysis estimates the conditional convergence model of the Barro's type, applied to the Portuguese NUTS3 regions for the period 1996-2005. The GMM estimation approach applied to regional panel data reveals that factors associated with external trade, human capital and sectoral labour share (especially of the industrial sector) are relevant to explain regional growth and convergence in Portugal.     

Trade partner diversification and growth: How trade links matter

We analyze the effects of a country’s export connections on its income growth using trade partner diversification (TPD) measures that capture the country’s relative importance in the international trade network. On top of the standard trade openness measures, TPD measures are shown to enter growth regressions positively and significantly, where one standard deviation increase in TPD is associated with a 1–1.5 percentage point increase in the annual growth rate. Threshold analyses show that TPD measures are positively and significantly correlated with growth in countries that have low financial depth, high inflation, low levels of human capital, or high trade openness.     

Does industrial concentration impact on the relationship between policies and volatility?

It is usually recommended that countries diversify their economies to guard against any negative shocks that might impact on one industry. However, previous research has not identified how concentration can impact on the effectiveness of macroeconomic policies. This paper attempts to evaluate the relationship between industrial concentration, policies and economic volatility for a sample of 147 countries for the period 1970 to 2005. The study reports that less concentrated countries tend to have lower rates of output, consumption and investment growth volatility. In addition, while trade and capital account openness variables alone tend to diminish economic volatility, in concentrated economies opening both the capital and trade account can increase economic volatility.     

Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?

Employing a firm-level dataset, this paper explores the effects of exchange rate volatility on the growth performances of domestic versus foreign, and publicly traded versus non-traded private manufacturing firms in a major developing country, Turkey. The empirical results using dynamic panel data estimation techniques and comprehensive robustness tests suggest that exchange rate volatility has a significant growth reducing effect on manufacturing firms. However, having access to foreign, and to a lesser degree, domestic equity markets is found to reduce these negative effects at significant levels. These findings continue to hold after controlling for firm heterogeneity due to differences in export orientation, external indebtedness, profitability, productivity, size, industrial characteristics, and time-variant institutional changes.     

全球价值链嵌入、出口技术升级与制造业增加值隐含碳——来自浙江细分行业的经验证据

以外向型经济和制造业大省浙江为例,运用投入产出法测度2001—2017年浙江制造29个细分行业出口增加值隐含碳,并运用面板数据模型研究了嵌入全球价值链、出口技术升级对出口增加值隐含碳的影响。研究表明,浙江省制造业出口产品单位贸易利益的二氧化碳排放成本即出口增加值隐含碳大幅度下降。出口技术升级、贸易开放显著地降低了浙江省制造业出口增加值隐含碳,能源强度、人力资本、参与国际垂直分工等因素导致了出口增加值隐含碳的增长。交叉项检验表明,研发强度较高的行业出口技术升级会显著降低出口增加值隐含碳,外商直接投资、煤炭消耗占比、资本劳动占比较高的行业出口技术升级会导致出口增加值隐含碳的增加。     

Does exchange-rate uncertainty matter in the Malaysia–E.U. bilateral trade? An industry level investigation

Due to ambiguity in the past literature, researchers have examined exchange rate volatility effect on trade using disaggregated data in recent years. Previous research has focused more on aggregated data having aggregation bias which has led to unnecessarily over-generalized findings. This study investigates the impact of exchange rate volatility on the Malaysian bilateral trade flows with European Union using industry level data. Our empirical findings, based on auto-regressive distributed lag framework, suggest that many import and export industries experience exchange rate volatility influence in the short run, while a very small number of industries show this effect in the long run. Moreover, the adverse impact of financial crisis (2007–2008) is more prevalent on import industries compared to export industries.     

Do external interventions work? The case of trade reform conditions in IMF supported programs

Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had trade reform conditions in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective as it combines carrots and sticks not available to the WTO. Yet, the effectiveness of these trade conditions has not been systematically studied. Using a unique dataset, this paper provides such an assessment. It finds that trade conditions are indeed associated with an increase in trade openness on average, but the effect comes mostly from countries that can be characterized by a high degree of “willingness to reform.”