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Working Paper
Where are global and U.S. trade heading in the aftermath of the trade collapse: issues and alternative scenarios
Global and U.S. trade declined dramatically in the wake of the global financial crisis in late 2008 and early 2009. The subsequent recovery in trade, while vigorous at first, gradually lost momentum in 2010. Against this backdrop, this paper explores the prospects for global and U.S. trade in the medium term. We develop a unified empirical framework ? an error correction model ? that exploits the cointegrating relationship between trade and economic activity. The model allows us to juxtapose several scenarios with different assumptions about the strength of GDP growth going forward and the ...
Working Paper
Explaining the global pattern of current account imbalances
This paper assesses some of the explanations that have been put forward for the global pattern of current account imbalances that has emerged in recent years: in particular, the large U.S. current account deficit and the large surpluses of the Asian developing economies. Based on the approach developed by Chinn and Prasad (2003), we use data for 61 countries during 1982-2003 to estimate panel regression models for the ratio of the current account balance to GDP. We find that a model that includes as its explanatory variables the standard determinants of current accounts proposed in the ...
Discussion Paper
The Dollar in the U.S. International Transactions (USIT) Model
The dollar's 20 percent climb against a broad index of foreign currencies since the middle of 2014 has led to an increased focus on how dollar fluctuations affect the U.S. economy. This note provides further detail on the structure and estimation of the trade block of the USIT model. In the context of the model, we present the estimated effect of a 10 percent dollar appreciation on U.S. trade flows and trade prices. We conclude with an assessment of the model's performance since the dollar began its steep appreciation in the summer of 2014.
Working Paper
Productivity growth and the Phillips curve in Canada
This study examines the impact of productivity growth on the relationship between inflation and unemployment in Canada. Recently it has been suggested that higher productivity growth is responsible for a shift in the U.S. Phillips curve that occurred in the late 1990s. This paper examines whether the Phillips curve in Canada shifted in a manner similar to that of the United States, and the degree to which higher productivity growth explains this shift.
Working Paper
Interest rates and the volatility and correlation of commodity prices
We purpose a novel explanation for the observed increase in the correlation of commodity prices over the past decade. In contrast to theories that rely on the increased influence of financial speculators, we show that price correlation can increase as a result of a decline in the interest rate. More generally, we examine the effect of interest rates on the volatility and correlation of commodity prices, theoretically through the framework of Deaton and Laroque (1992) and empirically via a panel GARCH model. In theory, we show that lower interest rates decrease the volatility of prices, as ...
Discussion Paper
Corporate Buybacks and Capital Investment: An International Perspective
In recent years, a great deal of attention has been paid in the United States to the simultaneous occurrence of relatively weak corporate capital investment (especially at this point in the business cycle) and historically elevated net share buybacks. Much of this commentary bemoans the fact that corporations are returning resources to shareholders instead of using them to boost capital investment, economic growth, and jobs.
Working Paper
Precautionary savings and the wealth distribution with illiquid durables
We study the role an illiquid durable consumption good plays in determining the level of precautionary savings and the distribution of wealth in a standard Aiyagari model (i.e. a model with heterogeneous agents, idiosyncratic uncertainty, and borrowing constraints). Transactions costs induce an inaction region over which the durable stock and the associated user cost are not adjusted in response to changes in income, increasing, on average, the volatility of non-durable consumption. The volatility of total consumption is then a function of the share of the durable good in the utility function ...