The global macroeconomics of NAFTA

Previous empirical studies of NAFTA have commonly used trade models that do not allow international capital flows to adjust to changes in regional trade arrangements such as NAFTA. This paper explores the dynamic implications of NAFTA with particular focus on the short-run and longer-run adjustment of financial capital. This adjustment affects the global allocation of physical capital and therefore changes the growth prospects for a country such as Mexico. Our results suggest that Mexico and the world economy gain more from NAFTA than merely a static reallocation of production possibilities. In the short run, the adjustment of financial capital affects nominal and real exchange rates. This adjustment is far more important for the short-term allocation of trade flows than partial equilibrium adjustment of trade based only on changes in long-term price differentials.     

Structural Changes in a Reforming World Economy: Implications for Indonesia

How will rapid East Asian industrialisation and international trade policy reforms affect Indonesia's economy? Taking an economy-wide perspective and drawing on projections to 2005, based on a global applied general equilibrium model (GTAP), we show the impact of Uruguay Round implementation, and explore other international influences on Indonesia's and neighbouring economies. Trade reforms likely to accompany China's (and Taiwan's) membership of the WTO are projected to boost the competitiveness of Indonesia's primary sectors at the expense of light manufacturing and the overall economy, while failure by OECD countries to honour Uruguay Round obligations to open their textile and clothing markets would reduce industrialisation in the region, slowing growth in its net food imports. The benefits to Indonesia of APEC liberalisations are also reported. All projections were completed in 1997 before the enormity of the financial crisis became clear; follow-on research should quantify the growth slowdown's impact on these results.     

Sectoral shifts and rates of profit

Summary In this paper the role of the capital market is analysed onthe base of a dynamic two-sector model of a closed economy. The way in which the allocation of investment is related to sectoral differences in the rate of profit and to diverging sectoral capital needs as well, turns out to be of great importance for the whole economy. Conclusions are drawn with regard to the long-run equality of profits after an initial disturbance. The role of the capital market is analysed too in connection with the functioning of sectoral labour markets. As far as unemployment and differing sectoral unemployment rates are concerned, the importance of the labour markets is obviously overwhelming. On that base it is possible to make some remarks on macroeconomic and sectoral investment policies with regard to employment.     

Home-product bias, capital mobility, and macroeconomic volatility

This paper uses a dynamic general equilibrium two-country optimizingmodel to analyse the consequences of international capital mobilityfor macroeconomic volatility. To this end, the dynamic macroeconomiceffects of a monetary policy, a fiscal policy, and a labor supplyshock are analysed. Simulations are used to analyse the implicationsof changes in the degree of capital mobility for the propagationof shocks. The simulation results obtained for a bond economyare compared with the simulation results obtained for a complete-marketeconomy. It is shown that allowing for a home-product bias inpreferences has a number of interesting implications for theway changes in international capital mobility and in the structureof international financial markets affect how shocks propagatethrough an open economy.     

Implementation and imbalance: dealing with hangover from the Uruguay Round

The Uruguay Round agreements impose bound obligations to implement,but provide only unbound promises of assistance—is therea legal solution within the WTO legal system, i.e. can implementationassistance be made a legal obligation? The author concludesthat the Doha negotiations on trade facilitation and on aidfor trade demonstrate that such a legal arrangement cannot beconstructed. This is not, however, a problem; the internationalcommunity has provided extensive trade-related assistance throughbilateral and multilateral development agencies. Regarding theoverall Uruguay Round imbalance (developing countries gave morethan they got), failure of the international community to acknowledgethat the imbalance stems in major part from the WTO agreementon intellectual property (TRIPS) has retarded a general making-up.     

Surges and stops in greenfield and M&A FDI flows to developing countries: analysis by mode of entry

This paper investigates the factors associated with foreign direct investment “surges” and “stops”, defined as sharp increases and decreases, respectively, of foreign direct investment inflows to the developing world and differentiated based on whether these events are led by waves in greenfield investments or mergers and acquisitions. Greenfield-led surges and stops occur more frequently than mergers-and-acquisitions-led ones and different factors are associated with the onset of the two types of events. Global liquidity is the factor significantly and positively associated with a surge, regardless of its kind, while a global economic growth slowdown and a surge in the preceding year are the main factors associated with a stop. Greenfield-led surges and stops are more likely in low-income countries and mergers-and-acquisitions-led surges are less likely in resource-rich countries than elsewhere in the developing world. Global growth accelerations and increases in financial openness, domestic economic and financial instability are associated with mergers-and-acquisitions-led surges but not with greenfield-led ones. These results are particularly relevant for developing countries where FDI flows are the major type of capital flows and suggest that developing countries’ macroeconomic vulnerability increases following periods of increased global liquidity. As countries develop they typically become more exposed to merger-and-acquisition-led surges, which are more likely than greenfield-led surges and stops to be short-lived and associated with domestic macroeconomic policies.     

The changing geography of world trade: Projections to 2030

Rapid economic growth in Asia (and some other emerging economies) has been shifting the global economic and industrial centres of gravity away from the north Atlantic, raising the importance of Asia in world trade, and boosting South–South trade. This paper examines how trade patterns are likely to change in the course of continuing economic growth and structural changes in Asia and the rest of the world over the next two decades. It does so by projecting a core baseline for the world economy from 2004 to 2030 and comparing it with alternative scenarios, including slower economic growth rates in the ‘North’, slower productivity growth in primary sectors, and prospective trade policy reforms in Developing Asia, without and with policy reforms also in the ‘North’ and in South–South trade. Projected impacts on international trade patterns, sectoral shares of GDP, ‘openness’ to trade, and potential welfare gains from reforms are highlighted, in addition to effects on bilateral trade patterns as summarized by intra- and extra-regional trade intensity and propensity indexes. The paper concludes with implications for regional and multilateral trade policy.     

量化宽松、资本流动与国际间货币政策协调

主要利用美国国际收支(简称BOP)账户、资金流量表等统计数据探讨量化宽松与资本流动之间相互联系。分析表明,国际资本流动与量化宽松之间关系密切,量化宽松是资本流向EMEs的重要原因,反过来资本流动则影响了量化宽松的有效性,量化宽松和资本流动是引发全球货币汇率冲突的关键性因素。各国应通过国际协调促进宏观经济政策的生效和压制冲突,使全球经济得以更加平衡地复苏以压制冲突,而且发达国家应承担更大的调整责任。     

国际资本流动的新特征及其影响

随着经济全球化的进一步发展,全球金融市场一体化日益深化,国际资本流动不仅日趋活跃,而且具有了新的特征,国际资本流动的变化对世界经济运行也正在产生正面与负面的影响。国际资本流动的新变化要求各国对于国际资本应该趋利避害,做出及时和合适的应对。     

Reforms and macroeconomic adjustments in Chile during 1974–1984

This paper provides a background on the main macroeconomic developments of the reform period. After a review of the macroeconomic disequilibrium before the reforms, the paper interprets the macroadjustments. The interpretation covers two distinct periods: 1973–1976, when policy was based on a closed-economy view, and 1977–1982, when macropolicy was increasingly guided by an open-economy model. The paper argues that the setback that Chile suffered during 1982–1983 and the large external debt that was accumulated were the result of two major errors. The first was the use of the exchange rate to stabilize prices without due regard for the incentives for large capital inflows that arose from this policy at a time when international capital markets were very liquid. The second major error was in the second half of 1981. After a large drop in capital inflows, the authorities relied on an automatic adjustment mechanism, by which the monetary squeeze from the reduction in capital inflows would improve the real exchange rate. Because wages were indexed to prior inflation, the adjustment mechanism was bound to create substantial unemployment, as indeed was the case. The paper concludes with the assessment that most of the micro reforms were in the right direction and had the expected result — and the errors were mostly in the design of macroeconomic policies.     

INDONESIAN TRADE LIBERALISATION: ESTIMATING THE GAINS

Indonesia has undergone comprehensive trade liberalisation by participating in multilateral and regional trade arrangements and by conducting unilateral liberalisation. This paper evaluates the different paths of liberalisation the country has followed, and measures their effects on the economy. It considers the impact of several liberalisation scenarios: unilateral liberalisation; regional liberalisation through APEC (Asia Pacific Economic Cooperation) and AFTA (the ASEAN Free Trade Area); and multilateral trade liberalisation through the Uruguay Round (UR). The results show that the full implementation of UR and APEC liberalisation would greatly benefit Indonesia, and that unilateral liberalisation, carried out in conjunction with the UR commitment, would lead to large welfare gains. On the other hand, the creation of AFTA is expected to add little to welfare in Indonesia or in the other ASEAN member countries.     

Economic Globalization from a Broader, Long-Term Perspective: Some Questions and Concerns

This article considers economic growth in view of a diversity of risks. These concern economic shifts between developing and developed regions with serious global implications. Some examples are labour and capital flows, attended by increasing instability, but also risks of international tax competition and environmental deterioration on a global scale. Moreover, the article addresses spiritual concerns about the materialistic and egoistic attitude encouraged by economic globalization and the strife for material wealth. The main conclusion is that perhaps a shift in emphasis from materialistic concerns towards spiritual values should be stimulated in the Western world.     

Exchange controls, international capital flows and saving-investment correlations in the UK: An empirical investigation

Exchange Controls, International Capital Flows and Saving-Investment Correlations in the UK: An Empirical Investigation. - This paper reexamines the Feldstein-Horioka approach to measure the degree of international capital mobility, focusing on the difference between the short-run and the long-run saving-investment correlation coefficient. The authors also investigate the effectiveness of the abolition of exchange control which, in October 1979, ended a long period of restrictions on capital flows between the UK and the international economy. Their results suggest that the short-run saving-investment correlation is significantly higher than the long-run one. Unlike most of the relevant literature, the empirical evidence suggests that the UK is financially highly integrated with the world economy after 1979.     

Channels of international risk-sharing: capital gains versus income flows

Global financial integration unlocks a huge potential for international risk sharing. We examine the degree to which international equity holdings act as a risk sharing device in industrial and emerging economies. We split equity returns into investment income (dividend distribution) and capital gains to investigate which of the two channels delivers the largest potential for risk sharing. Our evidence suggests that net capital gains are a more potent channel of risk sharing. They behave in a countercyclical way, that is they tend to be positive (negative) when the domestic economy is growing more slowly (rapidly) than the rest of the world. Countries with more countercyclical net capital gains experience improved consumption risk sharing. The empirical analysis furthermore suggests that these risk sharing properties of net capital gains have increased through time, in particular in the 1990s and early-2000s, on the back of a declining equity home bias and financial market deepening.     

Assessing Vulnerability to Financial Crisis: Evidence from Indonesia

This paper examines the view that the recent Indonesian crisis was largely unforeseen. The broadest macroeconomic indicators were of virtually no help in presaging the crisis; neither were high-frequency financial indicators. But warnings were there, just below the surface, in some of the macro indicators and in certain structural weaknesses that were long recognised as threats to financial stability. That said, none of these warnings suggested crisis of the magnitude that eventually occurred. The Indonesian experience indicates that macroeconomic stability should never be taken for granted. Signs of vulnerability to financial instability include: the degree of reliance on gross private capital inflows (taking into account maturities and the implications for rollovers); the extent of unhedged foreign exchange positions; and certain indirect indicators, such as policy slippages and key personnel changes. Finally, in a world of volatile capital flows, crisis will tend to occur before standard economic data suggest that crisis is imminent.     

Exchange Rate Volatility and Growth in Emerging Europe and East Asia

The paper investigates the impact of exchange rate volatility on growth in Emerging Europe and East Asia. Exchange rate stability has been argued to affect growth negatively as it deprives countries from the ability to react in a flexible way to asymmetric real shocks and increases the probability of speculative capital inflows and overheating. In contrast, exchange rate stability can be argued to affect growth in emerging market economies positively as transactions costs for international trade decline, uncertainty for international capital flows is less and macroeconomic stability is enhanced. Cross country panel estimations provide evidence for a negative impact of the exchange rate volatility on growth in both Emerging Europe and East Asia. Parts of this negative growth effect can be associated with exchange rate volatility caused by macroeconomic instability.     

Trade policy and protection in the European Community

The European Community is the world's largest trading entity. As a result, trade policy in the EC has an important impact on the world economy. This paper evaluates the formulation of trade policy in the EC and assesses the key instruments, both by sector and by target. The relative importance of tariff and non-tariff barriers is emphasised as is the role of anti-dumping. Finally, the impact of the single market programme and the Uruguay Round are assessed. Both will have a crucial bearing on the evolution of policy.     

Impacts of the Doha Round on Brazilian,Chinese and Indian agribusiness

The central themes to be addressed during the Doha Round of the world trade negotiations are the reduction of the agricultural production and export subsidies and improved market access for agricultural and non-agricultural goods. The G-20 group wields enough power to press negotiations at the Doha Round toward lower agricultural trade barriers and production and export subsidies. The objective of this study is to determine the impacts of the Doha Round on the economies of Brazil, China, and India. The Global Trade Analysis Project's (GTAP) general equilibrium model and database (version 7) are used. The Doha Round scenarios simulated in this paper consider the WTO agricultural production and export subsidy reduction requirement, and the application of the Harbinson approach, and Swiss formula to reduce import tariffs. Brazil and China present the highest GDP growth rate varying from 0.4 % to 1.4%. India shows a negative GDP growth rate in all scenarios, except in that which replicates the Uruguay Round. The welfare gains are positive, but small, for Brazil, China and India. The GDP loss observed in the economies of the EU25 and the US may make it difficult to reach a trade agreement at the Doha Round.     

国际资本的“逃往质量”现象及其对我国的影响

20世纪 90年代以来 ,各种类型的金融危机频繁发生 ,使世界经济产生了巨大影响 ,国际资本纷纷表现出“逃往质量”现象 ,这种现象随着国际经济环境的不断恶化而愈发表现的更突出。本文首先分析了近年来国际资本“逃往质量”现象的表现 ,进一步探讨其对新兴市场和对我国的影响 ,     

Changing nature of North–South linkages: Stylized facts and explanations

This paper examines the changing nature of growth spillovers between developed economies, the North, and developing countries, the South, driven by the process of globalization—the phenomenon of rising international trade and financial flows. We use a comprehensive database of macroeconomic and sectoral variables for 106 countries over the period 1960–2005. We consider the South to be composed of two groups of countries, the Emerging South and the Developing South, based on the extent of their integration into the global economy. Using a panel regression framework, we find that the impact of the Northern economic activity on the Emerging South has declined during the globalization period (1986–2005). In contrast, the growth linkages between the North and Developing South have been rather stable over time. Our findings also suggest that the North and Emerging South economies have started to exhibit more intensive intra-group growth spillovers.