On the connections between intra-temporal and intertemporal trades

This paper develops a new theory of international economics by introducing Heckscher–Ohlin features of intra-temporal trade into an intertemporal trade approach of current account. To do so, we consider a dynamic general equilibrium model with tradable sectors of different factor intensities, which allows for substitution between intertemporal trade (current account adjustment) and intra-temporal trade (goods trade). An economy's response to a shock generally involves a combination of a change in the composition of goods trade and a change in the current account. Flexible factor markets reduce the need for the current account to adjust. On the other hand, the more rigid the factor markets, the larger the size of current account adjustment relative to the volume of goods trade, and the slower the speed of adjustment of the current account towards its long-run equilibrium. We present empirical evidence consistent with the theory.     

Do Remittances Facilitate a Sustainable Current Account?

We examine how workers' remittances impact on the current account. In doing so, we focus on how remittances affect the sustainability rather than the size of current account balances. We find that the presence of remittances makes it more likely that exports and imports are cointegrated, thereby lending support to current account sustainability. Furthermore, quantile regression analysis suggests that increased remittances are associated with a faster speed of current account adjustment towards long‐run equilibrium, particularly for those countries characterised by already highly persistent current account balances. In contrast to a literature that emphasises an adverse Dutch disease impact of workers' remittances on the real exchange rate in terms of reduced external competitiveness, our findings suggest that remittances are actually beneficial to the current account balance.     

As the Current Account Turns: Disaggregating the Effects of Current Account Reversals in Industrial Countries

This paper extends the study of current account (CA) reversals by considering the implications for the composition of output and employment. It is shown that decreases in CA deficits imply increases in tradable relative to non‐tradable output and/or declines in investment. The impact of CA ‘rebalancing’ should therefore be expected to vary considerably across sectors of an economy. This intersectoral variation is studied by examining the dynamics of output, employment and prices using data for 55 sectors of the economy during 14 industrial country reversal episodes. The output and employment declines associated with CA reversals are most clearly evident in investment‐related sectors, while sectors related to primary commodities generally perform relatively well following reversals. Reversals are also followed by increases in relative inflation for tradable goods sectors.     

Outsourcing and the US Labour Market

There is worldwide concern about the vulnerability of the current labour force to displacement by future imported services. In the USA, some have suggested that as much as one‐third of the workforce might be vulnerable to such outsourcing. However, the labour market impacts of this displacement are difficult to assess using purely analytical or statistical approaches. In this paper, simulation methods are used to understand how sensitive the US economy and labour market are to increases in services imports. Specifically, the scenario examined assumes that the share of imported services in total employment increases from 0.8 per cent to 7.25 per cent over a time horizon in which workers are unable to change occupations. In response, it is found that all industries increase their use of imported services and their use of the composite input that is comprised of imported services and tradable labour. With the exception of legal workers, all workers in tradable occupations experience declines in their real wages. Demand for non‐tradable occupations labour rises in the industries that expand the most, while demand falls in shrinking industries. The non‐tradable occupations that are used intensively in the shrinking industries experience declines in real wages, while the real wages rise for workers in non‐tradable occupations used intensively in the expanding industries.     

Global Imbalances and Petrodollars

Oil exporters have run large current account surpluses. We explore oil exporters’ role in the global imbalances debate. Current account dynamics are estimated for oil‐exporting countries and the rest of the world. We find that fiscal policy has a much stronger effect on the current account of oil exporters than on current accounts of other countries. The current account adjustment of oil‐exporting countries is also faster. Fiscal policy of oil exporters can have a significant and speedy impact on global imbalances. The impact via the adjustment of exchange rates might not be effective.     

Debt Relief and the Current Account: An Analysis of the HIPC Initiative

In this paper I develop a model to investigate the connection between debt relief and current account sustainability. This model can be used as a key input in assessing whether a HIPC country's real exchange rate is ‘overvalued,’ and will thus need to go through devaluation. The working of the model is illustrated for the case of Nicaragua, a country that in 2002 had one of the highest external debt to GDP ratios: almost 300 per cent. Nicaragua is the second poorest country in the Western Hemisphere (after Haiti), and for the last decade has relied very heavily on foreign assistance and aid. Moreover, in the last few years Nicaragua has run extremely large current account deficits in excess of 37 per cent of GDP during 1997‐2001 largely financed by grants, donations and migrant remittances.     

欧债危机对我国对欧出口贸易的影响与因应措施

欧盟是中国最大的贸易伙伴。随着欧债危机逐渐从欧元区外围国家向核心国家蔓延,欧债危机引起的整个欧洲经济增长乏力、欧元贬值等问题势必会使中国对欧出口贸易受到影响。随着欧债危机的深化,相关成员国势必实施严格的紧缩政策,从而将使中国对欧出口遭遇更严峻的形势。鉴于欧元区在中国外贸出口中的重要地位,我们必须尽早设定应对措施,以期减缓欧债危机可能对我国经济造成的冲击。     

Services Offshoring and its Impact on Productivity and Employment: Evidence from Germany, 1995–2006

Economists have recently recognised services offshoring as an important influence on domestic labour market outcomes. Services are of particular interest since their significance has grown in terms of both quantity and quality. Only one and a half decades ago, most services were considered non‐tradable, but the emergence and development of new information and communication technologies has made many services internationally tradable. The liberalisation of international trade in services trade has further accelerated the volume of services trade. Our econometric estimations focus on services offshoring by German manufacturing sectors. We use revised input–output data from 1995 to 2006. We first estimate the impact of services offshoring on labour productivity. We then measure the effects of services offshoring on labour demand. The results show that services offshoring increased sectoral labour productivity, but reduced German manufacturing employment. The overall results suggest that labour demand decreased over 1995–2006, because labour‐reducing productivity and substitution effects dominated labour‐augmenting scale effects from services offshoring.     

Adjustment to devaluation with money and nontraded goods

This paper analyzes the dynamics of adjustment to devaluation in a framework which highlights the role played by nontraded goods and money. We provide a specific analytical model of devaluation incorporating substitution effects in production and consumption as well as liquidity effects resulting from a stock-flow adjustment process. The analysis provides specific solutions for the time path of the balance of payments and the price of nontraded goods following devaluation.     

收入再分配的消费效应:理论及中国例证

调整收入分配和扩大消费需求是当前的两大热点话题。基于后凯恩斯主义消费理论实证检验改革开放以来二元经济结构下收入再分配影响消费的作用机制。研究结果表明,尽管在全国层面上居民收入差距的扩大显著地制约着居民消费需求,但在其内部结构上城镇居民收入分配差距对其消费需求有着较强的负面影响,城乡收入差距对居民消费的影响次之,农村居民收入分配差距对其消费需求的影响并不显著。根据实证结果提出收入再分配调整的相应政策建议。     

Jobs and Exposure to International Trade within the Service Sector in Sweden

To establish in which service industries there is international trade (or it may potentially exist), we calculate locational Ginis for different industries. The basic idea is that from this measure of regional concentration of different activities within a country we can identify industries where there appears to be regional trade, and hence also a potential for international trade. Based on our method, we find that: (i) the number of employed in tradable service appears to be at least as large as in the manufacturing sector, (ii) tradable service is much more skill intensive than manufacturing, and (iii) lately, the employment in tradable service has increased substantially. We argue that the last mentioned result is consistent with the substantial growth of skilled labour in Sweden since the mid‐1990s (Rybczynski effect) and factors leading to increased relative demand for skilled labour. Particularly, increased competition from and offshoring to low‐wage countries seem recently to have had a considerable impact on the creation of skilled jobs and the displacement of less skilled jobs in the tradable sector in Sweden. Furthermore, we apply a similar method as for industries to identify tradable occupations. Using our classification of tradable industries and tradable occupations in a Mincer type wage equation, we find that workers in such industries and occupations receive a wage premia of 12–13 per cent.     

Dynamics of capital account and current account in Sri Lanka

This paper enquires the dynamics of current account and capital account in Sri Lanka for the period 2001:Q1 to 2016:Q1 and also examines the role of some policy variables such as exchange rate and interest rate in this dynamics. Estimated autoregressive distributed lag (ARDL) bound testing approach to cointegration followed by error correction representation of the ARDL model have found that current account is caused by capital account and exchange rate, where capital account causes to produce a deficit in current account. In the dynamic adjustment of current account due to exchange rate, an evidence of J-curve phenomenon is noticed. Capital account is neither caused by current account nor by exchange rate but interest rate has a positive impact on it. Robustness of these findings is testified by the vector autoregression model, Wald test of Granger causality followed by an impulse response analysis and a variance decomposition analysis. These analyses, in addition, establish a negative impact of interest rate on current account. With the best of knowledge this is the first study that reveals the dynamics of current and capital account of Sri Lanka. Such a dynamics is critical from the policy perspective. Policy makers should caution before capital account liberalization.     

Non‐Tradable Share Reform,Liquidity, and Stock Returns in China

This article studies the influence of the non‐tradable share reform in the cross‐section of stock returns in China. Prior research has generally neglected this important development in the Chinese stock market. We find that the firm‐specific illiquidity measures that reflect direct transaction costs, price impact and difficulties in trading immediacy, exhibit a positive and significant relationship with stock returns. These effects are particularly pronounced after the non‐tradable share reform. Furthermore, in the post‐reform era, portfolios with high illiquidity (i.e. high relative bid–ask spread, high Amihud illiquidity, low Amivest liquidity ratio) significantly outperform portfolios with low illiquidity, controlling for size, and book‐to‐market effects.     

The Role of Political Intelligence in Firms’ Export Decisions During the Euro Crisis

Inspired by the literatures on internationalization and absorptive capacity, we develop a model exploring how small firms—during crises—acquire and apply political information to export decisions. We test our model using data collected during the 2012 Eurozone crisis from a sample of 440 British, French, and Swedish SMEs. Findings indicate that firms dependent on the Eurozone for exports and heavily impacted by the crisis engaged in frequent political monitoring. In turn, frequent monitoring leads to the development of formal routines for exploiting political information. Firms with the most formal routines sought new export opportunities beyond the Eurozone. In contrast to previous research into small‐firm internationalization, our study stresses the significance of “shortcut” searching activities, non‐market information, and firms’ decisions to reduce prior investments in export markets.     

Financial dollarization and debt deflation under a currency board

In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we find that widespread debt dollarization showed no relationship with the firms’ production mix or the ever-changing probability of a nominal devaluation. While relative price changes favored export-oriented firms with the expected impact on sales, earnings and investment, increases in devaluation expectations elicited only a marginal differential response in investment from more financially dollarized firms. Our findings provide support to two criticisms faced by the Argentine currency board in recent years, namely, that by fueling beliefs in an implicit guarantee it stimulated across-the-board debt dollarization and that it could not fully isolate the economy from real shocks, as the feared balance sheet effect was replaced by a gradual but equally deleterious debt deflation effect.     

The Effect of Government Ideology on an Exchange Rate Regime: Some International Evidence

This paper comprehensively investigates the effect of government ideology on the type of exchange rate regime that a country implements via multinomial logit and multinomial probit models for 147 countries in the period 1974–2009. Our results clearly indicate that a left‐wing government increases the likelihood that a country implements a flexible regime in the classifications of exchange rate regimes. Nevertheless, evidence is weaker when using the de jure IMF course classification, which is set up by Ilzetzki et al. ( 2008 ). In a deeper investigation, we find that left‐wing governments are more likely to choose a flexible regime relative to a fixed one in our sample of OECD, non‐OECD and non‐Eurozone countries, as the impacts from government ideology on the determinant of the choice of exchange rate regime in Eurozone countries disappear. More importantly, we present many explanations for exchange rate regime choices when macroeconomic conditions, political constraints and institutions impact the choice of exchange rate regime.     

An explicit partial‐equilibrium model to justify the Generalized Marshall‐Lerner condition (GML)

Robinson's derivation of the Marshall‐Lerner condition (ML) is more general in that she considers a situation where initially the trade balance is not in equilibrium with the incorporation of the supply curves of exporters. This paper examines a partial equilibrium analysis of a country's imports and exports markets within a theoretical model which considers both the demand and supply sides in these two internationally traded‐goods markets. The aim here is to show explicitly how the Generalized Marshall‐Lerner condition (GML) of Robinson can be obtained. We examined the two effects of the nominal depreciation of the domestic currency on the trade balance: the volume effect and the value effect and how they counterbalance each other. We found that the standard Marshall‐Lerner condition (ML) was not sufficient when the trade balance was initially in deficit and it was also not necessary if the trade balance showed an initial surplus. Moreover, this study provides a new interpretation for Robinson’ sufficiency condition where the trade balance must improve following a nominal depreciation of domestic currency when the elasticity of foreign demand exceeds the ratio of imports to exports. This paper also examines the situation of a small open economy which could not influence the world prices where the foreign demand for exports and the foreign supply of exports are infinitely large. Finally, there is a discussion on two policy implications for exchange rate regulation: the amount of devaluation that is necessary to improve a given trade imbalance as a governments intervention and additional support for the slow improvement of the trade balance in the short run after a devaluation policy known as the J‐Curve effect.     

Some disequilibrium dynamics of exchange-rate changes

The aim of this paper is to suggest a formal dynamic model of the adjustment path of an economy during the time interval between an exchange-rate change and the attainment of a new equilibrium. It is a ‘first-pass’ model insofar as its structure and dynamics are very simple (a labor market and a commodity market are specified, with wage, price, and employment adjustment as functions of excess demand). The two principal conclusions are: exchange-rate changes may produce short-run effects qualitatively opposite to their long-run effects, not only in the current account, but also in employment and output; and knowledge of disequilibrium adjustment speeds for each sector of the economy taken in isolation appears to yield a misleadingly optimistic forecast of the disequilibrium adjustment speeds when all sectors adjust simultaneously to an exchange-rate change.     

Trade in High-Tech Services

This paper examines the size, scope, and potential implications of trade in high-tech services in the U.S. The results suggest that many service activities are tradable, tradable service activities tend to employ more educated workers and pay higher wages, and high-tech services account for a large share of service activities that are tradable. Service exporters are more prevalent in high-tech industries with larger establishments and higher wages. Within industries, service exporters tend to be larger, pay higher wages, and are more productive. Tradable service activities seem consistent with U.S. comparative advantage and, as a result, less likely to be vulnerable to offshoring. Consistent with this, recent employment growth in tradable service industries is not significantly different than employment growth in non-tradable service industries.     

Devaluations and emerging stock market returns

Stock returns over the 2 years surrounding 24 currency devaluations are examined. Using bootstrapped distributions, returns preceding the devaluation are shown to be significantly below normal, in both dollar and local currency terms. Most of the downturn, however, occurs well before the month of the devaluation. Returns following a devaluation are normal. While industry and company specific effects appear to influence return behavior, only country effects and leverage levels are statistically significant. At the country level, both aggregate economic activity (GDP) and the size of the devaluation are important in explaining return behavior. The stock of foreign debt has little impact on returns. Finally, even though returns appear to anticipate devaluations, they are not statistically significant at predicting the size of the devaluation.