Not all trade restrictions are created equally

There has been great focus in the recent trade theory literature on the introduction of firm heterogeneity into trade models. This introduction has highlighted the importance of the entry/exit decision of firms in response to changes in trade barriers. However, it is typical in many of these models to use iceberg transport costs as a general form of trade barriers that can be interchangeable with ad valorem tariffs. I show that this is not always an appropriate conclusion. Specifically, I illustrate that profit for an exporter is more elastic in response to tariffs than iceberg transport costs, which affects the entry/exit decision of firms. This has implications for welfare analysis and empirical specifications.     

International spillover effects of consumption taxation

This paper investigates the international spillover effects of a revenue-neutral increase in consumption taxes coupled with a reduction in wage taxes in a two-country open economy. Many economists feel that the consumption tax would be an improvement over the income tax. This paper provides counterexamples to the conventional wisdom. We show that conversion to a consumption tax may reduce capital accumulation and may transmit a negative externality to the rest of the countries in the world economy under certain conditions: endogenous labor supply and bequests.     

The London Monetary and Economic Conference of 1933 and the End of the Great Depression

In this paper I analyze the London Monetary and Economic Conference of 1933, an almost forgotten episode in U.S. monetary history. I study how the Conference shaped dollar policy during the second half of 1933 and early 1934. I use daily data to investigate the way in which the Conference and related policies associated to the gold standard affected commodity prices, bond prices, and the stock market. My results show that the Conference itself did not impact commodity prices or the stock market. However, it had a small effect on bond prices. I do find that the events associated with the abandonment of the gold standard impacted prices in a significant way, even before the actual monetary and currency channels were at work. These results are consistent with the “change in regime” hypothesis of Sargent (1983).     

Exchange Rate Regime and Demand for Reserves: Evidence from Kenya,Mexico and Philippines

This paper empirically investigates the demand for international reserves (and foreign exchange reserves) during fixed and floating exchange rates periods in three developing countries: Kenya, Mexico and Philippines. Based on theoretical models, three factors are identified as important for the demand of international reserves and foreign reserves: average propensity to import, volume of imports and variability of reserves. The paper employs the cointegration methodology and error correction method to investigate the relationships. Cointegration tests results indicate a reliable long-run stationary relationship between the international reserves (and foreign exchange reserves) and the stated explanatory variables across countries and sub-periods of fixed and clean float. The error correction results indicate causality from the explanatory variables to the reserves during both the short and long run. This is true during both the fixed and the floating periods.