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Author:Gopinath, Gita 

Working Paper
Tariff passthrough at the border and at the store: evidence from US trade policy

We use micro data collected at the border and at retailers to characterize the effects brought by recent changes in US trade policy ? particularly the tariffs placed on imports from China ? on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to the total prices paid by importers, suggesting that the tariffs? incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of the Chinese renminbi is unlikely to alter this conclusion. Next, ...
Working Papers , Paper 19-12

Working Paper
Emerging market business cycles: the cycle is the trend

Business cycles in emerging markets are characterized by strongly counter-cyclical current accounts, consumption volatility that exceeds income volatility, and dramatic ?sudden stops? in capital inflows. These features contrast with those of developed, small open economies and highlight the uniqueness of emerging markets. Nevertheless, we show that both qualitatively and quantitatively a standard dynamic stochastic, small open economy model can account for the behavior of both types of markets. Motivated by the observed frequent policy-regime switches in emerging markets, our underlying ...
Working Papers , Paper 04-4

Working Paper
Estimating the border effect: some new evidence

To what extent do national borders and national currencies impose costs that segment markets across countries? To answer this question the authors use a dataset with product-level retail prices and wholesale costs for a large grocery chain with stores in the United States and Canada. They develop a model of pricing by location and employ a regression discontinuity approach to estimate and interpret the border effect. They report three main facts: One, the median absolute retail price and wholesale cost discontinuities between adjacent stores on either side of the U.S.-Canadian border are as ...
Working Papers , Paper 09-10

Working Paper
Trade adjustment and productivity in large crises

The authors empirically characterize the mechanics of trade adjustment during the Argentine crisis using detailed firm-level customs data covering the universe of import transactions made during 1996-2008. Their main findings are as follows: First, the extensive margin defined as the entry and exit of firms or of products (at the country level) plays a small role during the crisis. Second, the sub-extensive margin defined as the churning of inputs within firms plays a sizeable role in aggregate adjustment. This implies that the true increase in input costs exceeds that imputed from ...
Working Papers , Paper 11-9

Working Paper
Defaultable debt, interest rates, and the current account

World capital markets have experienced large-scale sovereign defaults on a number of occasions, the most recent being Argentina?s default in 2002. In this paper, we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical, and interest rates and the current account are positively correlated. That is, emerging markets on average borrow more in good times and at lower interest rates than in slumps. ...
Working Papers , Paper 04-5

Working Paper
In search of real rigidities

The closed and open economy literatures both work on evaluating the role of real rigidities, but in parallel. This paper brings the two literatures together. We use international price data and exchange rate shocks to evaluate the importance of real rigidities in price setting. We show that, consistent with the presence of real rigidities, the response of reset-price inflation to exchange rate shocks exhibits significant persistence. Individual import prices, conditional on changing, respond to exchange rate shocks prior to the last price change. At the same time, aggregate reset-price ...
Working Papers , Paper 10-9

Working Paper
Fiscal devaluations

The authors show that even when the exchange rate cannot be devalued, a small set of conventional fiscal policy instruments can robustly replicate the real allocations attained under a nominal exchange rate devaluation in a standard New Keynesian open economy environment. They perform the analysis under alternative pricing assumptions?producer or local currency pricing along with nominal wage stickiness, under alternative asset market structures, and for anticipated and unanticipated devaluations. There are two types of fiscal policies equivalent to an exchange rate devaluation: one, a ...
Working Papers , Paper 12-10

Working Paper
Efficient expropriation: sustainable fiscal policy in a small open economy

We study a small open economy characterized by two empirically important frictions? incomplete financial markets and an inability of the government to commit to policy. We characterize the best sustainable fiscal policy and show that it can amplify and prolong shocks to output. In particular, even when the government is completely benevolent, the government?s credibility not to expropriate capital varies endogenously with the state of the economy and may be ?scarcest? during recessions. This increased threat of expropriation depresses investment, prolonging downturns. It is the incompleteness ...
Working Papers , Paper 06-9

Report
Coordination and Crisis in Monetary Unions

We study fiscal and monetary policy in a monetary union with the potential for rollover crises in sovereign debt markets. Member-country fiscal authorities lack commitment to repay their debt and choose fiscal policy independently. A common monetary authority chooses inflation for the union, also without commitment. We first describe the existence of a fiscal externality that arises in the presence of limited commitment and leads countries to over-borrow; this externality rationalizes the imposition of debt ceilings in a monetary union. We then investigate the impact of the composition of ...
Staff Report , Paper 511

Working Paper
Defaultable debt, interest rates and the current account

World capital markets have experienced large scale sovereign defaults on a number of occasions, the most recent being Argentina?s default in 2002. In this paper we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical, and interest rates and the current account are positively correlated. That is, emerging markets on average borrow more in good times and at lower interest rates as compared to ...
Working Paper Series , Paper 2004-31

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