UK shocks and Irish business cycles, 1922–79

This article examines the transmission of UK and global shocks to the Irish economy over the period 1922–79, using annual data for consumer prices and real GDP in a structural vector autoregression (SVAR) model. UK aggregate demand and supply shocks have large and significant effects on Irish CPI, but smaller effects on Irish real GDP. A historical decomposition indicates that UK aggregate supply and demand shocks played a more important role than domestic shocks in the evolution of Irish CPI. In contrast, the evolution of Irish real GDP is driven more by idiosyncratic domestic shocks than by UK shocks.     

THE GENERATIVE POWER OF AIR FREIGHT IN THE TRADE OPENNESS – ECONOMIC GROWTH NEXUS IN AFRICAN COUNTRIES

Foreign trade matters considerably more than ever in today's integrated economies, and the wealth of benefits afforded by air transport is one of the cornerstones of international trade. Therefore, to shed light on the precise role of air cargo, seen as an important motor of growth, this paper provides an empirical model to examine the relationships among trade openness, air freight volume and GDP per capita using panel cointegration techniques for a sample of Economic Commission for Africa (ECA) countries during the 1970‐2002 period. The analysis substantiates that there are cointegrated relationships among the three variables and that they are bound together in a long‐run equilibrium. Furthermore, evidence from fully modified Ordinary Least Squares panel estimations also indicates that positive trade and air freight shocks contribute to real GDP per capita. In addition, improvements in air cargo services are accompanied by an increase in trade openness in ECA countries and vice versa. These results underscore the important role of air freight and demonstrate that it should not have been overlooked in earlier studies. Finally, the empirical findings have important policy implications for our sample countries.     

The long-run determinants of North-South terms of trade and some recent empirical evidence

This paper reviews some recent evidence of the long-run decline in the terms of trade of primary commodities versus manufactures in the context of North-South trade. This evidence is evaluated in the light of competing explanations of the sources of the observed long-run trends in the context of a model of North-South trade which includes a general resource, labor and capital in the North and specific factors in a dual economy model of the South. Changes in factor supply, sectoral and factoral bias in technical change, biased demand conditions, changes in the pattern of protection, and institutional elements, all play a role in determining the evolution of commodity and factor prices. The Lewis hypothesis of sectoral bias in the pattern of technical change towards temperate agriculture in the North and against tropical agriculture in the South is then reexamined in the light of the recent empirical evidence on terms of trade movements and some sketchy evidence presented on the patterns of bias in technical change in the North and the South. The evidence is not consistent with an absolute technical change bias towards temperate agriculture in the North. Rather, the rate of technical change in temperate agriculture is now comparable to that experienced in manufactures so that Engel curve effects now assert the major downward pressure on the long-run terms of trade between temperate agriculture commodities and manufactures, overriding the effects of diminishing returns to natural resources as Northern population expands. The empirical evidence onbiased technical change in the South is much more sketchy and the evidence on various components of North-South terms of trade is more varied.     

我国贸易依存度实际水平测算及国际比较

随着我国外贸经济的快速发展,近年来有关贸易依存度的争论就从来没有停止过.我们认为争论产生的重要原因之一就是对贸易依存度本身认识不够深刻和全面,从而使得贸易依存度的计算没有一套比较科学和统一的方法.所以我们在前人研究的基础上,通过四次调整计算我国近年(2003年数据,2004年的数据不完整)贸易依存度的实际水平,并进行国际比较,以期对我国的实际贸易依存度水平有一个比较正确的认识,从而对今后的外贸工作提出正确的建议和意见.     

Trade openness, real exchange rates and job reallocation: evidence from Belgium

This paper investigates the impact of real exchange rate movements on job reallocation at the industry level. The analysis focuses on the manufacturing sector of Belgium, using data for 82 NACE 3-digit industries, over the time span 1996–2002. I find that real exchange rate changes do have a significant impact on job flows, and that this impact is magnified by increasing levels of trade exposure. In particular, a real appreciation is found to lower net employment growth through higher job destruction, while job creation is not significantly affected. These results are in line with previous empirical evidence on the United States, and differ from earlier findings for France and Germany, where the adjustment to real exchange rate shocks has been found to occur mainly through the job creation margin. I suggest that these differences may be explained by the fact that Belgium is a small open economy.     

Trade effects of silver price fluctuations in 19th-century China: A macro approach

We assess the role of silver price fluctuations in Chinese trade and GDP during the late Qing dynasty, when China still had a bimetallic (silver/copper) monetary system, in which silver was mostly used for international trade. Using a structural VAR (SVAR) with blockwise recursive identification, we identify the impact of silver price shocks on the Chinese economy from 1867, when trade data became available, to 1910, one year before the Qing dynasty collapsed. We find that silver price shocks had a sizable impact on both imports and exports but only a very minor effect on the trade balance, only a marginal impact on growth, and almost no effect on domestic prices. Stronger effects were partly mitigated by inelastic export quantities. Generally, the effect of silver price shocks, while considerable, was only short-lived, displaying no persistence in either direction. We find that the bimetallic system in Qing China might have mitigated a potential positive effect of silver depreciation but did not reverse the effect, which – contrary to claims made in the previous literature – was responsible for neither the worsening trade balance nor the inflation and the quickly increasing imports that occurred during our sample period.     

PROSPECTS FOR SKILLS-BASED EXPORT GROWTH IN A LABOUR-ABUNDANT,RESOURCE-RICH DEVELOPING ECONOMY

In an integrated global economy, specialisation in trade is an increasingly prominent strategy. A labour-abundant, resource-rich economy like Indonesia faces stiff competition in labour-intensive manufactures; meanwhile, rapid growth in demand for resources from China and India exposes it to the ‘curse’ of resource wealth. This diminishes prospects for more diversified growth based on renewable resources like human capital. Using an international panel data set we explore the influence of resource wealth, foreign direct investment and human capital on the share of skill-intensive products in exports. FDI and human capital increase this share; resource wealth diminishes it. We use the results to compare Indonesia with Thailand and Malaysia. Indonesia's reliance on skill-intensive exports would have been greater had it achieved higher levels of FDI and skills. Its performance in accumulating these endowments, and its relative resource abundance, impede diversification in production and trade. We present policy options flowing from these findings.     

Sectoral Trends and Shocks in Australia's Economic Growth

This paper examines the extent to which sectoral trends and fluctuations in the Australian economy can be understood using international trade theory and knowledge of key policy developments. It suggests they are consistent with theory, but it also reveals several features that make Australia's economy unusual. The most striking are the facts that (i) the agricultural sector's share of GDP remained fairly constant rather than falling during 1860–1960 and even during the latest mining boom; and (ii) the farm sector continued to enjoy a strong comparative advantage despite periodic spurts of growth in mining exports.     

Structural change in the Chinese economy and changing trade relations with the world

This paper examines the impact of structural change in China, in particular a reduction in the savings rate, an increase in the share of skilled workers, and an increase in productivity in technologically advanced manufacturing sectors targeted by Made in China 2025. Baseline projections until 2040 are generated with the WTO Global Trade Model, a dynamic computable general equilibrium model. With the modelled structural changes, the Chinese economy is projected to reorient its focus increasingly onto the domestic economy, raising the share of private household and government consumption in GDP, turning China's trade surplus into a trade deficit, reducing China's share in global exports, raising the share of services in both production and exports, shifting the destination markets of Chinese exports from developed to developing countries, and changing its pattern of comparative advantage away from sectors like light and heavy manufacturing to electronic and machinery equipment. The large bilateral trade surplus vis-a-vis the United States is projected to fall to almost zero.     

COMMODITY PRICE SHOCKS AND THE AUSTRALIAN ECONOMY SINCE FEDERATION*

Australia has experienced frequent and large commodity export price shocks similar to commodity exporters in Asia, Africa, and Latin America, but this price volatility has had much more modest impact on economic performance. Why? This paper explores Australian terms of trade volatility since 1901. It identifies two major price shock episodes before the recent mining‐led boom and bust. It assesses their relative magnitude, their impact on de‐industrialisation and distribution during the booms, and the labour market and policy responses to the shocks. Australia has indeed responded differently to volatile commodity prices than have other commodity exporters.     

人民币实际有效汇率与中澳贸易收支的关系——基于向量误差修正模型(VEC)分析

文章利用向量误差修正模型（VEC）,对中澳贸易收支与人民币实际有效汇率、中国实际GDP、澳大利亚实际GDP之间的关系作了实证分析。研究结果表明：中澳两国GDP、人民币实际有效汇率与两国双边贸易收支这四者之间存在长期均衡的关系;人民币有效汇率与两国贸易收支之间没有因果关系;调整人民汇率不能解决澳大利亚对中国的贸易逆差问题;人民币汇率与双边贸易收支之间不存在理论上的J效应;澳大利亚经济的发展有益于中国经济的发展,中国经济目前还是一个外贸拉动型的经济发展模式。     

Analysis of real GDP growth rates of greater China: An asymmetric conditional volatility approach

Most empirical studies of real gross domestic product (GDP) growth rates exclude the dimension of conditional volatility shocks. In this paper, we search for evidence of conditional volatility in the quarterly real GDP of greater China, which comprises the economies of Mainland China, the Hong Kong Special Administrative Region (SAR), and Taiwan. The widely accepted exponential GARCH model of Nelson [Econometrica 59 (1991) 347–370] is employed to capture the possible existence of asymmetric conditional volatility in real GDP. It is found that negative real GDP shocks may induce a greater impact on future volatilities compared with positive shocks of the same magnitude. Policy implications from our findings are discussed.     

Terms of Trade Shocks and Inflation Targeting in Emerging Market Economies

Emerging market economies (EMEs) have persistently experienced different waves of commodity terms of trade disturbances, generating macroeconomic instabilities. The adoption of inflation targeting (IT) by many EMEs has raised questions about its relative suitability in dealing with these shocks compared with other monetary policy regimes. This paper tests the robustness of IT compared with monetary targeting and exchange rate targeting regimes in coping with commodity terms of trade shocks using the panel vector autoregressive technique. The results show that in general, IT countries respond better to commodity terms of trade shocks especially with respect to inflation and output gap. However, exchange rates are more volatile in IT countries than in exchange rate targeting countries. The results suggest that EME countries can reduce the adverse effects of commodity terms of trade fluctuations when they adopt IT, but they also need to pay attention to exchange rate movements.     

Recovery from financial crises in peripheral economies, 1870–1913

What drives recoveries after financial crises? I address this question for the 1870–1913 “first era of globalization,” focusing on whether trade policy changes or positive movements in commodity prices played a bigger role in stimulating output growth after financial crises in peripheral economies. At this time before governments had modern fiscal and monetary policy tools to use while responding to crises protectionism was one of the few national-level policy options available for shaping economic activity. Improving terms of trade is another major factor that could influence output growth in the commodity-exporting countries included in this analysis. While previous studies of this period have looked at longer-run associations between these explanatory variables and economic growth, I focus on the aftermath of crises, and find that tariff rate increases had a positive impact on GDP per capita growth, while positive terms of trade changes did not have a significant effect on output growth. This suggests that governments played a substantial role in shaping post-crisis recoveries during this period.     

Stock Market's Response to Real Output Shocks in China: A VARwAL Estimation

This paper studies the connection between the stock market and real output in China and compares it with benchmark countries, employing a novel vector autoregression with asymmetric leads (VARwAL) model. It makes two contributions. First, it finds that the time profile of the Chinese stock market's response to real output shocks suggests no evidence of a distorted relationship due to manipulation of Chinese real output data or domination of the Chinese stock market by individual investors. Rather, the Chinese stock market is relatively more responsive to real output, in line with the larger share of manufacturing in the Chinese economy. Electricity output and industrial profits, two different, less-manipulable time series, yield similar results. Second, it presents the first use of VARwAL impulse responses to detect stock market bubbles: VARwAL captures the 2015 bubble in China successfully. Over the full sample period, China's stock market appears to have been less prone to bubbles than the US stock market.     

AVAR Analysis of the Impacts of Company Tax Rates on Foreign Direct Investment and other Macro-economic Variables in Australia

Abstract

Taxation policy has been recognized as a main determinant of foreign direct investment (FDI). However, the effect of taxation policy on other key macro-economic variables of interest has received little attention in the literature. This paper seeks to establish the long-run effects of a change in the Australian company tax rate on inbound FDI and other Australian macro-economic variables using vector autoregression (VAR) analysis to account for the interrelatedness of the variables under consideration. Results indicate that FDI, real gross domestic product (GDP) and trade with the rest of the world are all responsive to a change in the company tax rate.     

Business Cycle Asymmetry in China： Evidence from Friedman＇s Plucking Model

Friedman＇s plucking model of business fluctuations suggests that output cannot exceed an upper limit, but it is occasionally ＂plucked＂ downward below trends as a result of economic recessions. This paper investigates China＇s business fluetuations using quarterly real GDP data for the period 1978 2009. Our results show some evidence supporting Friedman＇s plucking model. We find that a ceiling effect of real output exists, and that negative asymmetric shocks significantly affect the transitory component, which captures the plucking downward behavior during the recession. The results also suggest that the basic asymmetric unobserved component model is not appropriate for directly modeling China＇s real output because the business＂ cycle is inaccurately measured, but it works quite well when considering a structural break in the second quarter of 1992. The results reveal that although China＇s economy strengthened in the second quarter of 2009, it is essential for China＇s government to take further positive and effective measures to maintain sustainable development of the economy.     

Effect of Money Supply on Real Output and Price in China

Over the past 30 years, China has achieved remarkable long-term economic growth. Using quarterly data, we study the effects of money supply on real output and inflation in China between 1993 and 2008. To this end, we use money supply shocks afler filtering out the expected component of the money supply. Our findings provide evidence supporting the asymmetric effect of positive and negative money supply shocks on real output and inflation in China. That is, real GDP growth in China responds to negative money supply shocks but not positive money supply shocks. In addition, inflation responds to positive money supply shocks but not negative money supply shocks. We conclude that the People＇s Bank of China＇ s policy of steady monetary growth appears to be appropriate. Our study offers important policy implications for China.     

Trade, FDI, and productivity convergence: A dynamic panel data approach in 25 countries

The investigation, described in the paper, included developing and implementing a dynamic panel framework to study and compare the role of trade and foreign direct investment (FDI) in long-run productivity convergence. Specifically, it employed the technique of a recently developed panel unit-root approach to examine and compare time-series behaviors of manufacturing productivity and services productivity of 25 countries from 1975 to 2004. Results indicated that long-run productivity convergence in manufacturing was trade-related as well as FDI-related. The results have also shown that grouping countries according to their trade partners tends to produce more significant evidence for productivity convergence than their FDI partners do. Furthermore, especially services sector shows no or little convergence, while the manufacturing sector shows strong evidence in favor of convergence. The findings suggest that trade and FDI matter for convergence particularly in the manufacturing productivity movement across countries but more specifically that trade proves more important in explaining long-run manufacturing productivity convergence.     

危机冲击与全球贸易波动的经验分析

本文对近二十年来历次危机冲击下全球贸易波动的特征进行经验比较后发现:贸易波动的幅度均高于经济波动幅度,同时贸易收入弹性值有逐步增大的趋势,而危机冲击时期贸易收入弹性值呈现明显的"放大性"并有出现负值的可能。因此,贸易增速历来高于经济增速的事实,很难准确解释危机冲击下的贸易大幅度波动。危机冲击下全球贸易波动特征的演进规律及其内在作用机制,应从国际分工演进和国际贸易自身特点入手,这是值得深入研究的大课题。