International Trade Openness and Monetary Policy: Evidence from Cross-Country Data
This article studies the extent to which open economies conduct monetary policy differently from economies that are relatively closed to international trade. I first estimate country-specific Taylor rules for 26 economies, following the approach of Clarida, Gal, and Gertler (1998 and 2000). Then, I examine the extent to which open economies assign systematically different weights to changes in economic outcomes, such as inflation and the output gap, than their closed economy counterparts do. I find that open economies respond less strongly to changes in expected inflation than relatively ...
No Credit, No Gain: Trade Liberalization Dynamics, Production Inputs, and Financial Development
We study the role of financial development on the aggregate and welfare implications of reducing trade barriers on imports of physical capital and intermediate inputs. We document that financially underdeveloped economies feature a slower response of real GDP, consumption, and investment following trade liberalization episodes that improve access to imported production inputs. To quantify the role of financial development, we set up a quantitative general equilibrium model with heterogeneous firms subject to financial constraints and estimate it to match salient features from Colombian ...
Trade in Commodities and Business Cycle Volatility
This paper studies the role of differences in the patterns of production and international trade on the business cycle volatility of emerging and developed economies. We study a multi-sector small open economy in which firms produce and trade commodities and manufactures. We estimate the model to match key cross-sectional and time-series differences across countries. Emerging economies run trade surpluses in commodities and trade deficits in manufactures, while sectoral trade flows are balanced in developed economies. We find that these differences amplify the response of emerging economies ...
International Trade Policy During COVID-19
Recent trade policy implemented to avoid shortages of essential medical equipment amid COVID-19 has been related to the country’s trade imbalances in these goods.
Finance and Development: Evidence from Firm-Level Data
An analysis of cross-country data sheds light on the link between finance and economic development.
International Trade and the Dynamics of Manufacturing Activity
Manufacturing exports and production might decline in the near future.
Financial Development and International Trade
This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with heterogeneous firms subject to financial frictions. Industries differ in capital-intensity, which leads to differences in external finance dependence. The model is parameterized to match key features of firm-level data. Financial development leads to substantial reallocation of international trade shares from labor- to capital-intensive industries, with minor effects at the aggregate-level. These ...
How the Impact of Social Distancing Ripples through the Economy
Social distancing directly hurts industries that rely on face-to-face contact. But the spillover effect is even affecting industries less dependent on such contact.
The Decline of Employment During COVID-19: The Role of Contact-Intensive Industries
Non-essential contact-intensive industries have experienced the largest job losses since the onset of COVID-19.
International Trade of Essential Goods During a Pandemic
This paper studies the role of international trade of essential goods during a pandemic. We consider a multi-country, multi-sector model with essential and non-essential goods. Essential goods provide utility relative to a reference consumption level, and a pandemic consists of an increase in this reference level. Each country produces domestic varieties of both types of goods using capital and labor subject to sectoral adjustment costs, and all varieties are traded internationally subject to trade barriers. We study the role of international trade of essential goods in mitigating or ...