Pooling data for the analysis of dynamic marketing systems

Vector autoregressive (VAR) models have become popular in marketing literature for analyzing the behavior of competitive marketing systems. One drawback of these models is that the number of parameters can become very large, potentially leading to estimation problems. Pooling data for multiple cross-sectional units (stores) can partly alleviate these problems. An important issue in such models is how heterogeneity among cross-sectional units is accounted for. We investigate the performance of several pooling approaches that accommodate different levels of cross-sectional heterogeneity in a simulation study and in an empirical application. Our results show that the random coefficients modeling approach is an overall good choice when the estimated VAR model is used for out-of-sample forecasting only. When the estimated model is used to compute Impulse Response Functions, we conclude that one should select a modeling approach that matches the level of heterogeneity in the data.     

Assessing the economic impacts of the EU-Singapore FTA with a dynamic general equilibrium model

Negotiations for the EU-Singapore FTA were concluded on December 6, 2012. Given that this is the EU’s first FTA with an ASEAN member country and the second one with a major Asian trading partner after the conclusion of the EU-Korea FTA, this agreement paves the way for future FTAs with countries in the region. The goal of this paper is to quantify the economic impacts of the EU-Singapore FTA using a dynamic computable general equilibrium model. The resutls estimated in this paper suggest that the bilateral reduction of tariff and non-tariff barriers brings benefits for both sides: Singapore GDP is expected to increase by € 2.7 billion whereas the EU gains are assessed at € 550 million. In addition, EU exports to Singapore would rise by some € 1.4 billion and Singapore’s exports to the EU by some € 3.5 billion. In a complementary scenario, the current paper also assesses the value of this FTA as an insurance policy against any hypothetical tariffs hikes in Singapore to WTO bound levels. In such a “worst case” scenario, the EU-Singapore FTA will protect EU GDP from a decrease of € 350 million and prevents a loss of € 3.7 billion EU exports to Singapore.     

Dispute Settlement at the WTO: Impacts of a No Deal in the US‐Brazil Cotton Dispute

On the day before Brazil was to start imposing retaliatory sanctions against the United States in the WTO dispute settlement case regarding unfair domestic and export upland cotton subsidies, the parties have reached a preliminary concession aimed at settling this eight‐year‐long trade dispute. In this paper, we explore the economywide impacts of a no deal with specific emphasis on intellectual property retaliation in a computable general equilibrium framework. As awarded by a WTO dispute settlement panel, Brazil would have been entitled to $591 million in retaliatory sanctions in goods sectors and $238 million in intellectual property sanctions. We find that retaliation by Brazil would have led to welfare gains for all countries except the United States. Most importantly, however, had Brazil not been allowed to retaliate in the form of suspension of intellectual property rights, the impact of trade retaliation alone would have been negative for both Brazil and the United States, a case of shooting oneself in the foot to shoot at the other person's foot.     

The EU-Korea FTA: anticipation,trade policy uncertainty and impact

Anticipatory trade effects of free trade agreements (FTAs) have been documented in various papers. One reason put forward trying to explain this phenomenon is reduced trade policy uncertainty. This paper is one of the first to explore the role of anticipation and trade policy uncertainty in the case of a recently concluded deep and comprehensive EU FTA, including significant behind the border measures. We use monthly data at a lower level of aggregation (8-digit level) compared to previous studies and we account for changes in the EU product classification over time. We also distinguish between the impact on products which are actually subject to liberalisation under the FTA as opposed to those which are already duty-free and we examine the effects on both the extensive margin and the intensive margin. We consider the impact of the FTA during three different periods of time (the start of negotiations, initialling of the agreement and entry into force), while comparing with the period before negotiations began. The results indicate that the FTA has had a positive impact on exports on both margins. The impact on the EU is somewhat higher indicating that EU exporters have more to gain in terms of increasing the predictability of the trade policy regime of the destination market and lowering its tariffs than vice versa. The results demonstrate that the impact of FTAs should not be assessed against the time period just prior to entry into force of the agreement, but much earlier to account for anticipation effects.     

Foreign direct investment in Central Eastern Europe

Foreign direct investment (FDI) has a significant role to play not only in the process of accelerating privatization, but in the development and strengthening of the emerging market economies of Central Eastern Europe (CEE). The inflow of FDI into Poland up to 1994 was marginal as compared to Hungary and the Czech Republic. The following paper examines the situation in Poland and outlines what lessons can be learnt from the Hungarian experience.     

Investment creation and diversion effects of the ASEAN–China free trade agreement

The ASEAN–China free trade agreement went into effect January 1, 2010 and became the world's third largest FTA by trade volume after the European Economic Area and the North American Free Trade Agreement. This paper focuses on highlighting the impacts of the reduction of barriers to trade on investment in a dynamic general computable equilibrium framework. We present and compare two alternative views/models of investment which yield different investment creation and diversion effects. As a first step, we adapt the dynamic GTAP model to take account of bilateral ownership of investment. Two versions of the model are considered. The first version is an example of applied models of investment demand, while the second is a model of investment supply. The two versions are based on different assumptions in their determination of cross-border investment. We simulate the implementation of ACFTA and we focus on the welfare impacts of investment creation and diversion.     

Competitive reaction- and feedback effects based on VARX models of pooled store data

We apply a model that accommodates dynamic phenomena in demand- and reaction functions. The latter functions capture reactions to actions as well as to consequences of actions. We estimate a fixed effects VARX model with dynamic and interactive effects for multiple brands based on pooled time series and cross-sectional data for two product categories. The Impulse Response Analysis (IRA) results for one category (tuna) under different scenarios show that the inclusion/exclusion of competitive reaction- and feedback effects matters a lot, consistent with a high degree of competitive interaction in this market. We find that the role of cross-brand feedback effects is greater than the role of traditional competitive reaction effects. Intrafirm effects (internal decisions) also play an important role. In a decomposition study we show that the exclusion of these effects may either increase (up to 12%) or decrease (by as much as 50%) the net unit sales effect of a 20% price reduction. By contrast, in the second category (shampoo), where brands have distinct positions, the exclusion of these effects matters very little.     

Determinants of direct cross-border public procurement in EU Member States

The aim of this paper is to analyse the determinants of direct cross-border public procurement in the EU Member States. For this purpose, we use a unique dataset based on data published on Tenders Electronic Daily which covers public procurement contract award notices for the 2008–2012 period and consists of more than 30 variables. Among others, results of the econometric estimation suggest that the probability of awarding a contract cross-border depends positively on the value of the contract and negatively on the number of bids. Among awarding country characteristics, GDP per capita and trade-to-GDP ratio are found to positively impact the probability of a cross-border award. Our results also provide econometric evidence for predictions from the economic theory. We make the case for the importance of product market regulation indicators used as proxies for anticompetitive practices, such as regulatory protection of incumbent firms and barriers to foreign direct investment, as well as the scope of public enterprises, and show that they have a significant negative impact on the probability of a cross-border win.