Sudden Stops and Current Account Reversals: Potential Macroeconomic Consequences for South Africa

South Africa is one of the emerging market countries that have received a relatively large amount of foreign capital since the mid‐2000s. In South Africa's case, these inflows were partly used to build the country's foreign exchange reserves, but more particularly to finance continued large current account deficits. During the course of the past two years, however, adverse domestic political developments, combined with the potential negative impacts of the unwinding of quantitative easing policies and the normalising of monetary policy in the United States on emerging markets in general, has raised the spectre of a sharp slowdown in foreign capital flows to South Africa and an associated reversal of the current deficit. This paper explores the potential impact of such a development on macroeconomic conditions in South Africa. The analysis consists of macroeconometric model‐based alternative scenarios backed up by both the international evidence on the impact of such events and South Africa's own history.     

2011-2012年东盟经济的分析与预测

2011年东盟国家经济保持复苏的态势。随着欧元区主权债务危机的蔓延,世界经济增长趋于放缓,东盟国家的经济增长也呈现出减缓的趋势。为应对国内经济的下滑,一些国家开始逐步调整宏观经济政策的方向。同时东盟区域经济一体化取得新的进展。在新的国内外经济形势下,2012年东盟国家经济发展将面临新的挑战,这将考验各国政府的宏观调控能力。     

Time preference and two-country trade

We present a dynamic two-country model of international trade with endogenous time preference. We show that if the two countries have similar preferences, production technologies and labor endowments, there exists a unique and stable steady state such that both consumption and investment goods are produced in both countries. Unlike the case of constant time preferences, the steady state is independent of the initial international distribution of capital. We prove a dynamic Heckscher–Ohlin theorem such that the labor-abundant country exports the labor-intensive good.     

Navigating the trilemma: Capital flows and monetary policy in China

In recent years China has faced an increasing trilemma—how to pursue an independent domestic monetary policy and limit exchange rate flexibility, while at the same time facing large and growing international capital flows. This paper analyzes the impact of the trilemma on China's monetary policy as the country liberalizes its good and financial markets and integrates with the world economy. It shows how China has sought to insulate its reserve money from the effects of balance of payments inflows by sterilizing through the issuance of central bank liabilities. However, we report empirical results indicating that sterilization dropped precipitously in 2006 in the face of the ongoing massive buildup of international reserves, leading to a surge in reserve money growth.We also estimate a vector error correction model linking the surge in China's reserve money to broad money, real GDP, and the price level. We use this model to explore the inflationary implications of different policy scenarios. Under a scenario of continued rapid reserve money growth (consistent with limited sterilization of foreign exchange reserve accumulation) and strong economic growth, the model predicts a rapid increase in inflation. A model simulation using an extension of the framework that incorporates recent increases in bank reserve requirements also implies a rapid rise in inflation. By contrast, model simulations incorporating a sharp slowdown in economic growth such as that seen in late 2008 and 2009 lead to less inflation pressure even with a substantial buildup in international reserves.     

林毅夫现场答问录

李祥林:美国的债务问题很严重,您对美国债务问题有什么样的认识?林毅夫:美国的债务问题确实很严重。美国还没有进行真正的结构改革,只是在吃止痛药。我觉得,现在的美国有点像当年的日本,没有着手解决根本问题。因为美元是储备货币,美国可以实施宽     

China's ‘New Normal’: Is the growth slowdown demand- or supply-driven?

China's ‘New Normal’ has been much discussed in recent years. An important aspect of the New Normal is the growth slowdown from levels of around 10% per annum to a more modest 6 or 7%. Not surprisingly, there has been widespread discussion of whether the slowdown is permanent or not and, in either case, what the sources of the slowdown are. However, much of this discussion has been based on informal analysis of the data rather than formal econometric results. We make a move in the direction of formal empirical analysis of this issue by estimating and simulating a vector autoregressive (VAR) model which distinguishes between demand, supply and foreign shocks as possible drivers of changes in economic growth. We analyse both two-variable (growth and inflation) and three-variable (foreign growth, domestic growth and inflation) VAR models and identify demand, supply and foreign shocks, using a modification of the Blanchard-Quah identification procedure. In the two-variable model we identify two shocks (demand and supply) and find that the slowdown since the GFC has been mainly supply-driven. This conclusion is not changed when a foreign growth variable is added to the model and a foreign shock is allowed for – we find that demand continues to be of relatively little importance, that the foreign shock also makes little contribution to explaining the long-run growth decline in China which continues to be driven by long-term supply factors. This conclusion is robust to a number of alternative formulations of the model. Thus, the growth slowdown may, indeed, be characterised as the ‘New Normal’.     

China's Trade Slowdown: Cyclical or Structural?

This paper analyzes whether the slowdown of China's trade in 2012–2015 was cyclical or structural, and further discusses the effects of structural factors, including trade structure, trade protectionism and global value chain participation. Using the national panel data from 2000 to 2015, based on the error correction model and import‐intensity‐adjusted demand model, our results show that the slowdown of China's trade growth in 2012–2015 was mainly a result of cyclical factors. Using 2000–2015 industry‐level data, we also find that the structure of trade goods had an inhibitory effect on the import slowdown but a positive effect on the export slowdown. Trade protectionism had an adverse effect on the trade growth slowdown. The global value chain participation marginally contributed to the slowdown in trade growth. Therefore, the impacts of structural factors on trade growth slowdown cannot be ignored, and related policies should receive greater attention from policy‐makers.     

Impacts of China-US trade conflicts on the energy sector

This paper uses a multi-country input-output model to simulate the impacts of the recent China-U.S. trade war. We first examine in detail the list of products subject to additional tariffs, and then use the model to estimate the economic impacts of the trade conflict. Based on the direct and indirect impacts on the energy sector of each country, we then extend the analysis to the issue of global energy demand. Our empirical results indicate that both China and the U.S. suffer from the conflict, although the impacts on China are greater Both countries experience a reduction in energy demand and a general economic slowdown. Although certain countries may benefit from the China-U.S. trade conflict in short-run, a general negative impact on the global economic prospects can affect all. Moreover, a short-term marginal impact on the global energy market is found, but as the consequence of long-term uncertainties and indirect economic impacts, further reductions of global energy demand are expected.     

Determinants of bilateral trade: evidence from ASEAN+3

In this research, we investigate the determinants of international trade, employing a dataset of bilateral trade and economics characteristics in the ASEAN+3 countries. We include a large number of independent variables that potentially drive international trade. We also use various standard gravity model variables to maintain consistency with the current literature. The results provide some important insights into the determinants of bilateral trade and offer policy implications regarding the promotion of international trade for governments worldwide. In particular, we find that output asymmetry between countries positively explains bilateral trade. Moreover, the findings suggest that making use of comparative advantage by differentiating the export product structure is important in promoting international trade. We do not find a consistent impact from bilateral exchange rate volatility on bilateral trade. This result points to the importance of providing opportunities for the hedging of currency uncertainty to avoid its adverse effects on trade. The results for other standard gravity model variables are consistent with the results of previous theoretical and empirical research.     

Gravity Approach for Modelling International Trade in South-Eastern Europe and the Commonwealth of Independent States: The Role of Geography, Policy and Institutions

Since the beginning of market reforms in 1989, countries of the South-Eastern Europe (SEE) and the Commonwealth of Independent States (CIS) trade significantly less with the world economy than those Central and Eastern European (CEE) countries which later joined the EU. To explain why this is the case, a number of hypotheses have been proposed in the literature. The key novelty of our study consists in a simultaneous assessment of the contribution to trade from geographical, policy and institutional factors, during the EU pre-accession period (1997–2004). An augmented gravity model is proposed and estimated for a reference group of 82 countries employing the Poisson and Tobit estimation techniques. We find that the low quality of economic institutions in the SEE and CIS countries contributed to a considerable proportion of their below potential international trade. We perform policy simulations using institutional data up to 2008 to identify channels for increasing international trade of the SEE and CIS.     

要素分工与发展中国家经济发展

要素分工的发展使国际贸易表现出两个新特点:一是世界市场交换的中间产品比重大大增加;二是发达国家与发展中国家的贸易比例不断上升。文章采用一个扩展的李嘉图模型对要素分工进行了分析。分析表明,要素分工提高了发展中国家参与国际分工并从中获利的机会,同时也提高了分工参与国的整体利益。对于发展中大国而言,积极发展国内的要素分工是减轻国际市场依赖的一个重要手段。     

Assessment of the effects of infrastructure investment under the belt and road initiative

Based on the estimated effect of infrastructure investment on total factor productivity (TFP) enhancing and trade costs reducing, this paper uses the data from Asian Development Bank to numerically assess the effects of Asian nations' infrastructure investment under the Belt and Road Initiative within the Global Trade Analysis Project (GTAP) model, and the results show that most countries or regions' economic growth, welfare, foreign trade, and trade terms are promoted in varying degrees. However, some countries (regions) have suffered. Additionally, the existing division of labor and trade patterns between developed economies and developing countries somehow consolidated because of changes in trade. In addition, China's industrial transformation and upgrading will benefit from the infrastructure investment under the Belt and Road Initiative, namely, the traditional industries slowdown or decline and high-tech manufacturing and service industries speed up, along with the optimization of factor allocation among industries.     

Growth slowdowns redux

We analyze the incidence and correlates of growth slowdowns in fast-growing middle-income countries, extending the analysis of an earlier paper (Eichengreen et al., 2012a). We continue to find dispersion in the per capita income at which slowdowns occur. But in contrast to our earlier analysis which pointed to the existence of a single mode at which slowdowns occur, in the neighborhood of $15,000–16,000 2005 purchasing power parity dollars, new data suggest the possibility of two modes, one at $10,000–11,000 and another at $15,000–16,000. A number of countries appear to have experienced two slowdowns, consistent with the existence of multiple modes. We suggest that growth in middle-income countries may slow down in a succession of stages rather than at a single point in time. This implies that a larger group of countries is at risk of a growth slowdown and that middle-income countries may find themselves slowing down at lower income levels than implied by our earlier estimates. We also find that slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products accounts for a relatively large share of exports, consistent with our earlier emphasis of the importance of moving up the technology ladder in order to avoid the middle-income trap.     

Growth Slowdown in China since 2008: Will There Be a Hard Landing in the Near Future?

China has witnessed an unprecedented great leap forward in investment since the 2008 global financial crisis, and at the same time real GDP growth has undergone a significant slowdown. This paper examines China's growth slowdown since 2008 up to 2013 using a growth accounting model in a systematic way. It is found that China's growth slowdown since 2008 almost completely comes from a sharp slowdown in total factor productivity growth. During this period, the positive effect on growth from expanding investment has been completely offset by the negative effect of the slowdown in total factor productivity growth. Currently, China's economy has slid into the Solow downward path. Under these circumstances, a soft landing is completely infeasible. Unless the Chinese Government implements substantial rebalancing and comprehensive and in‐depth market‐oriented reform, accompanied by large‐scale de‐investment (decreasing in the ratio of investment in GDP) and massive employment adjustment, China will be unable to avoid the Solow downward path, and a hard landing in investment will be inevitable in the near future.     

Strategic R&D policy in a quality-differentiated industry with three exporting countries

We examine strategic research and development (R&D) policy for quality-differentiated products in a third-market trade model. We extend the previous work by adding a third exporting country, so that the market structure is international triopoly. We show that the presence of the third exporting country affects strategic R&D policies. With three exporting countries, the lowest-quality exporting country gains from taxing domestic R&D and the middle-quality exporting country gains from subsidizing domestic R&D under both Bertrand and Cournot competition. As in the duopoly case, however, the optimal unilateral policy for the highest-quality exporting country depends on the mode of competition. Various cases of policy coordination by exporting countries are also examined.     

Institutions,Capital, and Growth

The international development community has encouraged investment in physical and human capital as a precursor to economic progress. Recent evidence shows, however, that increases in capital do not always lead to increases in output. We develop a growth model where the allocation and productivity of capital depends on a country's institutions. We find that increases in physical and human capital lead to output growth only in countries with good institutions. In countries with bad institutions, increases in capital lead to negative growth rates because additions to the capital stock tend to be employed in rent‐seeking and other socially unproductive activities.     

全球化背景的加工贸易模式和发展历程观察

对墨西哥、新加坡、日本、韩国、印度5个国家和我国的苏州、珠三角地区以及重庆加工贸易模式发展历程和特色效益的分析表明,由于各个国家和地区自身资源禀赋和技术条件等方面存在差异,在不同的历史阶段,面对不同的国际政治经济环境,采取不完全相同的经济发展战略和政策,各种加工贸易模式具有各自的特点。     

Regime change and debt default: the case of Russia, Austro-Hungary, and the Ottoman empire following World War One

We consider the effect of the three largest regime changes following World War One on the foreign debt repayments of the succeeding regimes. The Bolsheviks repudiated the Tsarist debt, both external and internal in early 1918, and could not borrow internationally until the 1970s. The Austro-Hungarian successor states, with the exception of Romania, remained on good terms with lenders, and quickly gained access to foreign capital. However, the Ottoman successor states entered into protracted negotiations before accepting responsibility for a share of the debt, which meant they faced a lengthy delay before being able to re-enter the international capital market. We analyze these events using a game theoretical model of incomplete information, whereby capital markets can not directly observe a government’s ‘type.’ We find that there were two main economic reasons why countries did not settle their debts after their regimes changed. Some countries, in particular Russia, did not value continued credit market access as highly as before, and second that international lenders will not trust a regime in default with a new loan.     

Brain drain in the age of mass migration: Does relative inequality explain migrant selectivity?

Brain drain is a core economic policy problem for many developing countries today. Does relative inequality in source and destination countries influence the brain-drain phenomenon? We explore human capital selectivity during the period 1820–1909.We apply age heaping techniques to measure human capital selectivity of international migrants. In a sample of 52 source and five destination countries we find selective migration determined by relative anthropometric inequality in source and destination countries. Other inequality measures confirm this. The results remain robust in OLS and Arellano–Bond approaches. We confirm the Roy–Borjas model of migrant self-selection. Moreover, we find that countries like Germany and UK experienced a small positive effect, because the less educated emigrated in larger numbers.     

Country of origin,branding strategy and internationalisation: the case of Chinese piano companies

This paper studies the internationalisation of Chinese piano firms from a branding perspective. The purpose of the paper is twofold. First, it examines the interplay between the country of origin (COO) effect and international branding, and how COO affects the choice of branding strategies in international markets. Second, it explores the possible link between international branding decisions and international expansion of the firm. A model is introduced that illustrates the relationships between COO, branding options and internationalisation. Corresponding to its progress in internationalisation, a firm's branding development in international markets may follow certain stages. As the firm moves to advanced stages, it increases its international brand equity; the impact from negative COO will decrease and eventually become irrelevant. The literature on internationalisation is largely based on the experience of MNEs from Western developed countries. Multinational firms from developing countries such as China possess some unique characteristics that make it very difficult to apply Western theories to them. The emergence of MNEs from developing countries calls for the development of new theories.