An Estimation of the Impact of Oil Shocks on Crude Oil Exporting Economies and Their Trade Partners

This research evaluates the impact of oil price shocks on oil producing and consuming economies; we used a simultaneous equation framework for different countries with business relations. As expected, we found that oil-producers (here, Iran and Russia) benefit from oil price shocks. However contrary to previous findings, they also benefit from the indirect effect through their trade partners. For oil-consuming economies, the effects are more diverse. In some countries, output falls in response to an oil price shock, while some others seem to be relatively immune. Generally, those countries which trade more with oil producers gain indirect benefits via higher demand from oil-producers. For instance, the Netherlands, Germany, France, Italy, the US, the UK, and China get a negative direct effect and positive indirect effect from oil producing countries. This is exactly the result that we anticipated. India has both negative effects directly and indirectly and seems to suffer more in a positive oil price shock. For Japan, Spain, Switzerland and Turkey the results are reversed. They benefit from an oil shock directly and indirectly.     

TRADE OPENNESS: AN AUSTRALIAN PERSPECTIVE

Australia's external trade is relatively low compared with the size of its economy. Indeed, Australia's openness ratio (exports plus imports as a proportion of GDP) in 2002 was the third-lowest among the 30 OECD countries. This paper seeks to understand Australia's low openness by analysing the empirical determinants of aggregate country trade. We present an equation for country openness which explains a substantial amount of the cross-country variation. The most important explanators of openness are population and a measure of distance to potential trade partners. Countries with larger populations trade less, as do countries that are relatively more remote. Furthermore, after controlling for trade policy there is little evidence of a positive correlation between openness and economic development. The openness equation suggests that Australia's level of trade is relatively close to what would be expected. The most important factors in explaining Australia's low openness ratio are its large geographic size and distance to the rest of the world.     

The contribution of institutions, trade, and geography to the development process: How robust is the empirical evidence to variations in the sample?

This paper uses an influence spectrum to identify influential subsets in a stylized cross-country data set and finds that institutions, geography, and trade (policy), all appear to play a significant role in the development process for a relatively large sub-sample of countries. For example, equatorial distance, a proxy for geography, becomes positive and significant (originally negative and insignificant) after removing only eight countries or observations from the original sample of sixty-three, while controlling for institutions and trade. In fact, for this set of fifty-five countries all three variables have the correct sign and are statistically significant. As another example, the trade variable becomes positive and significant (originally insignificant) after removing only two countries from the original sample.First version received: May 2003/Final version received: February 2004     

Trade facilitation and country size

It is argued that compared with large countries, small countries rely more on trade and therefore are more likely to adopt liberal trading policies. The present paper extends this idea beyond the conventional trade openness measures by analyzing the relationship between country size and the number of documents required to export and import, a measure of trade facilitation. Three important results follow. First, trade facilitation does improve as country size becomes smaller; that is, small countries perform better than large countries in terms of trade facilitation. Second, the relationship between country size and trade facilitation is nonlinear, much stronger for the relatively small than the large countries. Third, contrary to what existing studies might suggest, the relationship between country size and trade facilitation does not appear to be driven by the fact that small countries trade more as a proportion of their gross domestic product than the large countries.     

Do oil price changes really matter to the trade balance? Evidence from Korea-ASEAN commodity trade data

The contribution of this article is to assess the effect of oil prices have on the trade balance in the framework of bilateral commodity trade data between Korea and each of the four ASEAN member countries—Indonesia, Malaysia, Singapore, and Thailand. To examine this subject thoroughly, we first assume the effects of oil price changes to be symmetric and apply the linear autoregressive distributed lag (ARDL) method to the subject. We find that the price of crude oil indeed has an important role in affecting Korea's trade balance with those four ASEAN economies in both the long- and short-run. We then separate oil price hikes from oil price plunges and implement the nonlinear ARDL method to reveal that there is evidence that changes in oil prices appear to have asymmetric effects on the trade balance for certain products in the long- and short-run.     

我国棉花国际贸易“贱卖贵买”现象研究

通过对 1 978年以来世界上 1 0个最大棉花贸易实体进出口数据进行比较分析 ,发现我国棉花贸易具有极为反常的“贱卖贵买”特征 :即通常在国际棉价较低时处于棉花净出口国地位并出口较多 ,而在棉价较高时却处于净进口国地位并进口较多。上述“贱卖贵买”现象与国内长期维系棉花流通垄断和价格管制体制存在内在联系。改变传统棉改思路 ,成功地进行棉花流通市场化改革 ,是根治棉花贸易“贱卖贵买”问题的必要条件     

Economic Performance, Trade Restrictiveness, and Efficiency

The paper addresses the question of whether trade restrictiveness impacts economic performance, via a trade restrictiveness index that is decomposable into a trade distortion and a domestic distortion component. The paper builds on the Anderson and Neary price index measure of trade distortion, in evaluating trade restrictiveness via a distance function approach. This is accomplished by adding a “dual” version to their trade restrictiveness price index, based on distance functions that scale output quantities. The authors compute the trade restrictiveness quantity index (TRQI) using a parametric frontier approach to model the production side of the economy, and a panel of information on the agricultural sector of a set of European Community countries. The results suggest that the use of TRQI makes a considerable difference to interpretations of the efficiency impact of agricultural trade policies in EC countries, as compared to policy‐oriented aggregates or result‐oriented measures of trade restrictiveness.     

Asset arbitrage and the price of oil

It is commonly understood that macroeconomic shocks influence commodity prices and that one channel for this is the link between interest rates, expected future asset returns and stock-holding. In this paper the link is extended to the petroleum market with the recognition that recorded stocks of oil comprise a small share of annual demand and that the parallel with storable commodities is the decision to produce the oil in the first place, as opposed to holding it in the ground as reserve. Oil reserves are then a key asset in producing countries, which is arbitraged against financial assets. Thus, when the yield on financial assets falls, retaining oil reserves becomes more attractive to producing countries, which then have less incentive to accommodate demand rises, and so the oil price rises. This perspective on oil pricing is modeled in a dynamic multi-region general equilibrium framework in which regional households manage portfolios of assets that include oil reserves. When the model is calibrated to match observed data over two decades, simulation results indicate that asset arbitrage made a large contribution to the high pre-GFC oil price.     

THE MEASUREMENT OF TERMS OF TRADE EFFECTS

The change in goods and services available in a national economy brought about by the shifting of external price relationships is referred to as the terms of trade effects. This paper reviews the various methods which have been devised since the war to define and quantify such effects on the Gross National Product. The statistical annex shows that, as far as OECD countries are concerned, the differences between the various measures are not significant. Whereas the effects from terms of trade represented, on average, less than one half of one percent of the GNP of OECD countries during the 1960's the percentage has increased substantially since 1973, due most importantly to the increase in the oil price; by 1977 (on a 1970 price basis), it had reached 5 percent of GNP in Japan and up to 6 percent in Italy. On the other hand, the extreme case of Saudi Arabia where various formulas generate effects amounting to between one half and the whole of GNP, indicates that the measurement of terms of trade effects by various methods may give different results.     

Structural transformation and the oil price

What part of the high oil price can be explained by structural transformation in the developing world? Will continued structural transformation in these countries result in a permanently higher oil price? To address these issues I identify an inverted-U shaped relationship in the data between aggregate oil intensity and the extent of structural transformation: countries in the middle stages of transition spend the highest fraction of their income on oil. I construct and calibrate a multi-sector, multi-country, general equilibrium growth model that accounts for this fact by generating an endogenously falling aggregate elasticity of substitution between oil and non-oil inputs. The model is used to measure and isolate the impact of changing sectoral composition in the developing world on global oil demand and the oil price in the OECD. I find that structural transformation in non-OECD countries accounts for up to 53% of the oil price increase in the OECD between 1970 and 2010. However, the impact of structural transformation is temporary. Continued structural transformation induces falling oil intensity and an easing of the upward pressure on the oil price. Since a standard one-sector growth model misses this non-linearity, to understand the impact of growth on the oil price, it is necessary to take a more disaggregated view than is standard in macroeconomics.     

The trade reducing effects of market power in international shipping

Developing countries pay substantially higher transportation costs than developed nations, which leads to less trade and perhaps lower incomes. This paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs. In the presence of market power, shipping prices depend on the demand characteristics of goods being traded. We show theoretically and estimate empirically that ocean cargo carriers charge higher prices when transporting goods with higher product prices, lower import demand elasticities, and higher tariffs, and when facing fewer competitors on a trade route. These characteristics explain more variation in shipping prices than do conventional proxies such as distance, and significantly contribute to the higher shipping prices facing the developing world. A simple back of the envelope calculation suggests that eliminating market power in shipping would boost trade volumes by 5.9% (for the US) to 15.2% (for Latin America). Our findings are also important for evaluating the impact of tariff liberalization. Cargo carriers decrease shipping prices by 1–2% for every 1% reduction in tariffs.     

The distributive impact of terms of trade shocks: The case of the oil price changes in Russia

The halving of oil prices, during a short period between 2014 and 2015, has generated major terms of trade losses for oil exporting countries. This terms of trade shock has economy‐wide effects and significant distributive impacts. This paper, using a macro‐micro simulation model, describes and quantifies the channels of transmission from the drop of oil prices, to changes in welfare distribution at the household level for the case of the Russian Federation. The oil price reduction generates a reverse Dutch disease impacting sectoral employment, factor returns and consumption prices. It causes a contraction of employment and wages in more skill‐intensive (non‐tradable) sectors, and a reduction in consumption prices that is more pronounced for non‐food than for food goods. When these shifts are mapped to changes in incomes at the micro level, all households are affected. Poverty rates increase by 1 to 4 percentage points, depending on the poverty line used. At the US$ 10 a day threshold, 4.1 million additional people fall into poverty. Along the consumption distribution, richer people are affected more than those in the bottom 40%. However, this minor progressive impact may be reversed due to increases in unemployment and cuts in social programmes.     

Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries

While the relationship between oil prices and stock markets is of great interest to economists, previous studies do not differentiate oil-exporting countries from oil-importing countries when they investigate the effects of oil price shocks on stock market returns. In this paper, we address this limitation using a structural VAR analysis. Our main findings can be summarized as follows: First, the magnitude, duration, and even direction of response by stock market in a country to oil price shocks highly depend on whether the country is a net importer or exporter in the world oil market, and whether changes in oil price are driven by supply or aggregate demand. Second, the relative contribution of each type of oil price shocks depends on the level of importance of oil to national economy, as well as the net position in oil market and the driving forces of oil price changes. Third, the effects of aggregate demand uncertainty on stock markets in oil-exporting countries are much stronger and more persistent than in oil-importing countries. Finally, positive aggregate and precautionary demand shocks are shown to result in a higher degree of co-movement among the stock markets in oil-exporting countries, but not among those in oil-importing countries.     

International trade, exhaustible-resource abundance and economic growth

Countries with oil and other natural resources have grown less rapidly than those countries without. This phenomenon is known as the “natural resource curse”. We develop an infinite-horizon, two-country model of trade in which countries are identical, except that one country is endowed with deposits of an exhaustible resource and the other is not. Within the context of the model, we show that this phenomenon can be explained in part by an inelastic demand for the exhaustible resource that increases growth in trade revenues and induces the resource-abundant country to invest relatively less than the country lacking in exhaustible resources. These results are derived analytically and illustrated by an empirical analysis based on plausible parameters obtained from data.     

Measuring the Impacts of Global Trade Reform with Optimal Aggregators of Distortions

Aggregation of trade distortion measures is essential in applied work, but traditional trade‐weighted average measures are egregiously flawed. This paper shows how appropriate tariff aggregation can overcome underestimation of both efficiency and terms‐of‐trade gains from reform. The improvement is shown to result from better measurement of a distortion effect that is most important in the early stages of reform and a weighting effect that becomes more important as protection is reduced. Applications confirm that the technique can be applied relatively easily, and—with elasticity estimates suggested by the available econometric evidence—point to close to a doubling of the global welfare gains from global trade reform, and dramatic changes in the measured welfare impacts in many individual cases. Sensitivity analysis suggests that, for global trade reform, the ease of substitution between tariff lines is much more important than that between varieties from different countries. We provide an online aggregation tool to allow replication of our analysis or investigation of alternative scenarios for global reform. We hope that this paper will contribute both to wider use of optimal aggregators and improved estimates of the key elasticity parameters.     

The international wealth channel: a global error-correcting analysis

This article investigates empirically whether shocks to asset prices transmit into the trade balance through consumption and investment for a group of five of the world??s most industrialized countries. We refer to this transmission channel as the international wealth channel and estimate a GVAR model including 29 countries with quarterly data over the period 1981Q1?C2006Q4. Generalized impulse response functions show that after a negative stock price shock US and UK consumption decreases, followed by an improving trade balance. This pattern is also visible for France, but not for Germany and Japan. Stock price decreases are only associated with decreasing investment and an improving trade balance in the UK. For housing, we do find that a negative shock to UK housing prices decreases domestic investment and improves the trade balance. However, this pattern is not visible in the other countries. Finally, a domestic negative real exchange rate shock only has a significantly positive impact on the US trade balance.     

Responses of international stock markets to oil price surges: a regime-switching perspective

We propose an enhanced regime-switching model to investigate the relationships between oil price surges and stock market cycles in five oil-dependent countries. Our model accounts for the joint effects of the West Texas Intermediate (WTI) and Brent oil markets and simultaneously captures asymmetry, volatility persistence and regime shifts contained in the underlying financial data. We find that stock market returns strongly exhibit a regime-switching behaviour, but they react differently to the increases in the price of oil. More precisely, the conditional volatility of studied stock markets during the bear market phases is found to be less affected by oil price surges than during the bull market phases. Whether the effects of oil shocks are positive or negative depends greatly on the degree of reliance on imported oil, the share of the cost of oil in the national income and the degree of improvement in energy efficiency of a given country. Finally, the relatively opposite effects of the WTI and Brent oil markets suggest the potential of substitution between them as well as the necessity of a diversification strategy of oil supply sources.     

The gains from trade revisited

This paper revisits the issue of whether countries gain more from trading with countries that are similar to themselves, or with countries that are different. A model based on relative endowment and technological differences across countries is developed. The main result is that a country may experience a region of increasing gains from trade as its trading partner becomes more similar to itself in terms of relative endowments. The model also predicts that for countries with sufficiently similar relative endowments, both factors of production may experience gains from trade.     

World Agricultural Trade Reform: Implications for Australia

In this paper we assess the implications of agricultural trade reform by GATT member countries. To do this, we link two general equilibrium models, a world food trade model and the ORANI model of the Australian economy. By treating the ORANI model as an integral part of the world model, we are able to focus on the implications for Australia of world agricultural trade reform.
The findings suggest that, if price distorting agricultural policies were removed by GATT member countries, world food commodity prices would rise, some by up to 30 per cent, and world food trade expand by about a third. Australia would be a major beneficiary of these international developments, the value of its agricultural exports rising by close to 15 per cent. In 1986, this would have meant for Australia additional export earnings of around SUS750 million, as well as more rapid economic growth.     

Trade costs,quality and the skill premium

We develop a monopolistic competition model with non‐homothetic factor input bundles where increasing quality requires increasing use of skilled workers. As a result more skill abundant countries export higher quality, higher priced goods. Using a multi‐country dataset, we test and confirm the findings in Schott ( 2004 ) of a positive effect of skill abundance on unit values identified with US data. We extend the core model with per unit trade costs leading to the Washington apples effect that goods shipped over larger distance are of higher quality. The combination of high‐quality goods being relatively skill intensive with the Washington apples effect implies that countries at a larger distance from their trading partners display a higher skill premium. Simulating our model, we find that a doubling of distance of a country relative to all its trading partners raises the skill premium in a country by about 1.6%.