Did the West Coast Port Dispute Contribute to the First-Quarter GDP Slowdown?
In this post, we examine how the labor dispute at the West Coast ports, which began in the middle of 2014, might have affected GDP growth. Although the dispute started as early as July 2014, major disruptions to international trade did not surface until 2015:Q1. By that time, export and import growth through the West Coast ports in the first quarter were 14 percentage points to 20 percentage points lower than growth through other ports.
AUTHORS: Amiti, Mary; Bodine-Smith, Tyler; Cavallo, Michele; Lewis, Logan T.
What's Driving the Recent Slump in U.S. Imports?
In this post, we explore what has been driving the recent slump in U.S. imports of non-oil goods.
AUTHORS: Amiti, Mary; Bodine-Smith, Tyler; Hottman, Colin; Lewis, Logan T.
Supply- and demand-side factors in global banking
What is the role of supply and demand forces in determining movements in international banking flows? Answering this question is crucial for understanding the international transmission of financial shocks and formulating policy. This paper addresses the question by using the method developed in Amiti and Weinstein (forthcoming) to exactly decompose the growth in international bank credit into common shocks, idiosyncratic supply shocks, and idiosyncratic demand shocks for the 2000-16 period. A striking feature of the global banking flows data can be characterized by what we term the ?Anna Karenina Principle?: all healthy credit relationships are alike, but each unhealthy credit relationship is unhealthy in its own way. During non-crisis years, bank flows are well explained by a common global factor and a local demand factor. But during times of crisis flows are affected by idiosyncratic supply shocks to a borrower country?s creditor banks. This has important implications for why standard models break down during crises.
AUTHORS: Amiti, Mary; McGuire, Patrick M.; Weinstein, David E.
How much do bank shocks affect investment? Evidence from matched bank-firm loan data
We show that supply-side financial shocks have a large impact on firms' investment. We do this by developing a new methodology to separate firm-borrowing shocks from bank supply shocks using a vast sample of matched bank-firm lending data. We decompose loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of financial institution concentration means that individual banks are large relative to the size of the economy, which creates a role for granular shocks as in Gabaix (2011). As a result, bank supply shocks?that is, movements in the supply of bank loans net of borrower characteristics and general credit conditions?can have large impacts on aggregate loan supply and investment. We show that these bank supply shocks explain 40 percent of aggregate loan and investment fluctuations.
AUTHORS: Amiti, Mary; Weinstein, David E.
International shocks and domestic prices: how large are strategic complementarities?
How strong are strategic complementarities in price setting across firms? In this paper, we provide a direct empirical estimate of firms? price responses to changes in prices of their competitors. We develop a general framework and an empirical identification strategy to estimate the elasticities of a firm?s price response both to its own cost shocks and to the price changes of its competitors. Our approach takes advantage of a new micro-level data set for the Belgian manufacturing sector, which contains detailed information on firm domestic prices, marginal costs, and competitor prices. The rare features of these data enable us to construct instrumental variables to address the simultaneity of price setting by competing firms. We find strong evidence of strategic complementarities, with a typical firm adjusting its price with an elasticity of 35 percent in response to the price changes of its competitors and with an elasticity of 65 percent in response to its own cost shocks. Furthermore, we find substantial heterogeneity in these elasticities across firms, with small firms showing no strategic complementarities and a complete cost pass-through, and large firms responding to their cost shocks and competitor price changes with roughly equal elasticities of around 50 percent. We show, using a tightly calibrated quantitative model, that these findings have important implications for shaping the response of domestic prices to international shocks.
AUTHORS: Amiti, Mary; Itskhoki, Oleg; Konings, Jozef
Is the United States losing its productivity advantage?
Strikingly high rates of labor productivity growth in China, India, and other emerging economies have prompted concerns that U.S. workers and firms are losing ground to their competitors in world markets. A closer look at the evidence, however, suggests that rapid foreign productivity growth will bring gains as well as losses to the U.S. economy. Some import-competing firms may be compelled to restructure or leave the market, but consumers will benefit from lower import prices and more import varieties, and U.S. exporters may gain access to cheaper intermediate products from abroad.
AUTHORS: Stiroh, Kevin J.; Amiti, Mary
What's behind volatile import prices from China?
In a sharp departure from earlier trends, the price of U.S. imports from China rose 6 percent in the 2006-08 period. To explore the forces behind this surprising increase, the authors create a new import index that uses highly disaggregated data to track price developments in different product types. The index reveals that the largest price increases were concentrated in industrial supplies - goods that rely heavily on commodity inputs. The authors conclude that the surge in commodity prices through mid-2008 was the primary driver of the rising import prices from China.
AUTHORS: Davis, Donald R.; Amiti, Mary
Did Trade Finance Contribute to the Global Trade Collapse?
The financial crisis of 2008-09 brought about one of the largest collapses in world trade since the end of World War II. Between the first quarter of 2008 and the first quarter of 2009, the value of real global GDP fell 4.6 percent while exports plummeted 17 percent, as can be seen in the chart below. The dramatic decline in world trade?a loss of $761 billion in nominal exports?came through two channels: decreased demand for imports and supply effects, most likely arising from financial constraints. In this post, we look at evidence that supply effects, including curtailed funding for export-related activities, played a key role in the trade collapse?and thus in the transmission of the financial crisis from Wall Street to ?Main Street,? here and abroad.
AUTHORS: Weinstein, David E.; Amiti, Mary
Consumer Goods from China Are Getting More Expensive
We find that, in a sharp reversal of earlier trends, U.S. import prices for consumer goods shipped from China have been rising rapidly in recent quarters?by 7 percent between 2010:Q2 and 2011:Q1. In this post, we track U.S. import price movements in Chinese goods in different product categories by creating an import index that uses highly disaggregated data. We also consider the likely causes of the recent rise in prices for consumer goods. If these price hikes persist, they could have important consequences for U.S. businesses and consumers because China is the largest single supplier of U.S. imports, accounting for more than 20 percent of non-oil imports.
AUTHORS: Mark Choi; Amiti, Mary
China’s Impact on U.S. Inflation
U.S. import prices of consumer goods shipped from China have been moderating in recent quarters, following an upward surge of 11 percent between mid-2010 and the end of 2011. These price changes have far-reaching consequences for U.S. businesses and consumers, because China is the largest single supplier of imports to the United States, accounting for more than 20 percent of nonoil imports and more than 30 percent of consumer goods. In this post, we track U.S. import price movements in different product categories from China by constructing import price indexes that use highly disaggregated data. We also explore various underlying factors that might explain these important trends.
AUTHORS: Amiti, Mary; Mark Choi