The choice of an invoicing currency in international trade and the balance of trade impact of currency depreciation

Cross-country differences in the choice of an invoicing currency in international trade is one reason for cross-country differences in estimated exchange rate coefficients in short-run balance of trade equations. If exports are invoiced in domestic currency while imports are invoiced in a foreign currency, a depreciation will increase the domestic currency value of outstanding import contracts, and may cause the balance of trade to fall in the short run. Countries with different invoicing patterns will have different effects on the short-run trade balance following a depreciation. We explore a simple theory of invoicing currency choice, drawing inferences regarding the likely choices for 14 countries. This allows a classification of countries according to the expected short-run balance of trade effect of a currency depreciation. Empirical estimates support the hypothesized groupings based on suggested currency invoicing patterns.     

The theory of optimum currency areas,trade adjustment,and trade

This article seeks to provide a closer integration of the theory of optimum currency areas with the theory of international trade. A currency area is treated as a continuous variable ranging from zero to one: zero if there is no enlargement, and some positive value otherwise, corresponding exactly to the percentge of trade in the enlarged area. The benefits of widening a currency area are then regarded, in terms of conventional trade theory, as equivalent to a reduction in transportation cost. The costs of widening a currency area are seen, instead, with reference to open economy macroeconomics, as a drop in the speed of adjustment of the terms of trade to their long-run equilibrium level. On this basis, it is shown that the marginal benefits of enlarging a currency area fall, the marginal costs rise, and an optimum size arises. But this size depends heavily on the optimal composition of the members.CEPR     

The impact of EMU on trade flows

The Impact of EMU on Trade Flows. — In this paper we quantify the impact of exchange rate volatility on trade flows within the EU with the help of a gravity trade model. We consider bilateral instead of total exports, and we use panel data. Moreover, we introduce dynamics into the model, taking lagged exports as explanatory variable. The estimation of this model for the period 1962–1995 leads to significant negative coefficients for the proxy of exchange rate variability. We use these estimates to calculate the potential trade-creating effect of a monetary union, setting the exchange rate volatility equal to zero.     

The impact of AFTA on intra-AFTA trade

ASEAN countries have liberalised intra-ASEAN trade over the last 20 years by establishing the ASEAN Free Trade Area (AFTA). This paper aims to examine the impact of trade liberalisation under AFTA on intra-ASEAN trade. By applying a gravity model, we find positive and significant trade creation effects from the tariff elimination for a wide range of products. In addition, the analysis reveals that the elasticity of tariff reduction on imports tends to be much larger than that on exports. Trade creation effects for the new ASEAN members are relatively small compared to those for the old members. Our results show that AFTA has been successful in promoting intra-AFTA trade, while we argue that further expansion may be achieved by increasing the use of AFTA and by reducing/removing non-tariff measures (NTMs) through such ways as improving customs procedures and harmonizing/mutually recognizing product standards.     

The impact of technological differences on east-west trade

Zusammenfassung Die Auswirkungen von Unterschieden in der Technologie auf den Ost-West-Handel. —Aus der empirischen Analyse des internationalen Austauschs von Technologie und technologieintensiven Produkten im Ost-West-Handel ergeben sich zwei klare Ergebnisse. Erstens wird die Ansicht best?tigt, da\ Technologiestr?me im Ost-West-Handel dominieren und da\ die Str?me von technologieintensiven Produkten von den entwickelten L?ndern mit einer Marktwirtschaft zu den L?ndern mit einer Planwirtschaft flie\en. Zweitens ergibt sich jedoch ein anderes Muster der technologischen Abh?ngigkeit, wenn nur die “hohe” Technologie betrachtet wird, hier definiert als stark oder durchschnittlich F-und-E-intensive Güter: Die Rolle dieser “hohen” Technologie im Ost-West-Handel ist relativ gering. Ein wichtiger Grund dafür, da\ stark F-und-E-intensive Güter nicht in gro\em Umfang von den Ostblockl?ndern importiert werden, liegt darin, da\ diese Gruppe Konsumgüter enth?lt (Fernsehen, Hi-Fi-Ausrüstungen, elektronische Güter usw.). Harte Devisen werden aber weiterhin vorwiegend zum Kauf von Investitionsgütern zugeteilt, d. h. für den Kauf von Technologie an sich. Au\erdem verhindern mengenm?\ige Beschr?nkungen im Ost-West-Handel, da\ technologieintensive Produkte in dem Umfang gehandelt werden, wie es gem?\ der Theorie zu erwarten w?re.

---

Résumé L’effet des différences technologiques sur le commerce est-ouest. ⟶euxaspects sont démontrés par l’analyse empirique des flux de la technologie et des produits basés sur la technologie en commerce est-ouest. Le premier résultat confirme l’opinion que le commerce est-ouest est dominé par les flux de technologie et que le flux de technologie incorporée s’écoule des économies de marché développées vers les économies planifiées. Le deuxième résultat, cependant, suggère une structure assez différente de la dépendance technologique si l’on considère seulement la technologie ?haute? définie ici par des produits hautement et modérément R&D-intensifs : Le r?le de la technologie ?haute? est relativement faible. Une raison importante pourquoi les produits hautement R&D-intensifs ne sont pas importés en grande échelle est qu’ils incluent des biens à consommation (télévision, hi-fi équipement, électroniques). Mais les monnaies fortes continuent à être réservées avant tout pour l’achat des biens d’investissement, c’est-à-dire pour l’achat de la technologie ellemême. De plus, les restrictions quantitatives en commerce est-ouest empêchent que les produits intensifs à technologie sont commercés en mesure comme prédite par la théorie.

---

Resumen El impacto de diferencias tecnol?gicas sobre el intercambio comercial entre el Este y el Oeste. -El análisis enxpirico de las corrientes de tecnología y de bienes de base tecnológica intercambiados entre el Este y el Oeste demuestra claramente dos cosas. Primero se confirma la opinión de que en el intercambio comercial entre el Este y el Oeste predominan las corrientes de tecnología y que la dirección de la corriente de tecnologia incorporada es de los países desarrollados de economía de mercado hacia los pafses de economia centralmente planificada. El segundo resultado, empero, sugiere una estructura de dependencia tecnológica diferente, si se considera solamente la ?alta? tecnología, definida como bienes moderadamente y altamente intensivos en investigatión y desarrollo (I&D). La ?alta? tecnología cumple un papel relativamente menor en el intercambio comercial entre el Este y el Oeste. Una de las razones por las cuales bienes muy intensivos en I&D no se importan en gran escala es que incluyen bienes de consumo (aparatos de televisión, equipos de audio, artefactos electrónicos, etc.). El Este continúa con su política de asignar divisas preferentemente para compras de bienes de capital, o sea, para la compra de la tecnología misma. Además, restricciones cuantitativas sobre el comercio Este-Oeste impiden el intercambio de bienes intensivos en tecnología en la medida indicada por la teoría del comercio internacional.

     

Robust Taylor rules under heterogeneity in currency trade

It is demonstrated in this paper that the exchange rate should be included in the Taylor rule when there is heterogeneity in currency trade to have a determinate and least squares learnable rational expectations equilibrium that also is desirable in an inflation rate targeting regime. Moreover, for certain Taylor rule parameterizations, these properties of the interest rate rule are robust against the degree of technical trading in currency trading.     

An empirical study on the hysteresis of currency substitution in Cambodia

This paper examines whether the currency substitution (CS) phenomenon in Cambodia is in a hysteresis state. We employ a simple model of money-in-the-utility function with two currencies (home and foreign), in which the effect of network externalities on the use of foreign currency is taken into account. The equation derived from the model is estimated using the autoregressive distributed lag approach to cointegration for the period from June 1993 to June 2009. Our estimation results indicate that (1) there exists a stable, long-run relationship among the variables considered, (2) the CS ratio increases when people expect a higher rate of depreciation in the exchange rate, and most importantly, (3) there is evidence supporting the existence of a network externality, thereby implying the hysteresis of the CS phenomenon in Cambodia. Given the characteristics of the CS process in Cambodia, any measure or policy option to bring down the CS degree must be carefully considered.     

The impact of MERCOSUR on trade of Brazilian states

We consider the impact of MERCOSUR on trade among Brazilian states and on trade by Brazilian states with MERCOSUR and the rest of the world. We use a theoretically founded gravity model to shed light on MERCOSUR??s possible creation and diversion effects as well as its ??preference erosion?? effect on trade among Brazilian states. Using data on interstate trade over a 4-year period, including 1?year prior to the MERCOSUR period (1991), we deliver empirical evidence at state level with a focus on the impact of MERCOSUR which can vary across Brazilian regions. We show that MERCOSUR increased Brazilian states?? trade with member countries, but had no effect on either interstate trade or Brazilian states?? trade with third countries. The paper finds that MERCOSUR??s impact varies across Brazilian regions and that Center West region did not benefit from the integration to MERCOSUR. We use an estimation method dealing better with the traditional issue of zero trade values and heteroskedasticity than ordinary least squares does.     

新贸易壁垒对我国外贸的影响及对策

在传统贸易壁垒作用日益减弱的今天,技术壁垒、绿色壁垒、社会壁垒等新型的非关税壁垒已成为我国外贸发展的主要障碍。新贸易壁垒有具体成因,并已对我国的外贸产生了许多影响,要突破新贸易壁垒必须在积极推广使用国际标准等方面采取相应的对策。     

金融危机对贸易结构的影响:作用及传导

本文结合20世纪以来发生的四次主要国际金融危机,从市场传导、金融传导、政策传导三个方面系统分析金融危机对贸易结构的影响和传导机理。     

On the elasticity of substitution in international trade

Summary Attention for biases in the measurement of the Elasticity of Substitution (ES) in applied international trade flow modelling has a long tradition. It was mostly directed at the issue of the acceptability of the (often implicit) assumptions made on the parameters of the underlying demand model. The purpose of this paper is to prove both theoretically and with the help of some numerical examples that another strong potential source of biases in assessingES's in trade modelling does exist which gained remarkably little attention in the literature, namely, the regional pattern of international trade flows.     

The impact of intra-industry trade on business cycle synchronization in East Asia

This paper empirically analyzes distinctions between intra- and inter-industry trade indices. The research indicates that the co-movements of business cycles are influenced more through the intra-industry trade channel than by the total volume of trade itself. As trade integration among Asian countries increased, business cycle synchronization among these countries was expected to expand through trade transmission. Inter-industry trade resulting in higher specialization will induce less synchronized business cycles, while intra-industry trade could lead to increased business cycle synchronization. Moreover, I find that increased business cycle synchronization, as one of the optimum currency area criteria, is overemphasized.     

The impact of ECOWAS on intraregional trade flows: An empirical investigation

There is a scarcity of published statistical analysis that examines the impact of economic integration schemes in Africa. This study fills the gap in the literature. The impact of Economic Community of West African States (ECOWAS) on trade flows of its member countries is examined applying an econometric analysis. The parameters of a multivariate trade-flows model are estimated using a panel data of the 1975 to 1991 period. The results suggest that the regional integration scheme has succeeded in increasing trade flows between member countries. The general view in the literature is that African integration schemes have failed to increase trade flows.     

Chinese RMB exchange rate and local currency price stability in ASEAN trade

The article uses trade data between China and ASEAN countries to test hypotheses related to pricing to market (PTM) and consequent local currency price stability (LCPS). The degree of price discrimination associated with real RMB exchange rate changes between China and ASEAN + 2 shows evidence of local currency price stability in some industries in which exporters may be less competitive. China's trade policy may have also played a role in the local currency price stability. The article finds no evidence that RMB appreciation creates a larger impact on price adjustment than RMB depreciation.     

The two sterling crises of 1964: a comment on Newton

In a recent article in this journal, Newton claimed that there were two sterling crises in the autumn of 1964 and that the government response to the second crisis followed a ‘textbook reaction’. This comment challenges both suggestions and argues that there was one sterling crisis and that the government did not deal with the crisis adequately.     

China's impact on South African trade and inflation

There has been much controversy about the impact of Chinese growth on the rest of the world. It is generally accepted that China has a dampening effect on global inflation through the supply of cheap products. On the other hand, imports from China could displace domestic production and hence have adverse effects on economic growth and employment. Thus, the question of whether a country benefits from trading with China is a country-specific issue. The results in this paper indicate that limited short-term costs have resulted from the strengthening of trade relations between South Africa and China. As far as inflation is concerned, the paper does not find convincing empirical evidence at the aggregate level for inflation in China leading to domestic price changes. At the disaggregate level, however, there appear to be stronger sector-specific linkages between prices in China and South Africa.