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Jel Classification:F14 

Report
Who bears the cost of a change in the exchange rate? The case of imported beer

This paper quantifies the welfare effects of a change in the nominal exchange rate using the example of the beer market. I estimate a structural econometric model that makes it possible to compute manufacturers' and retailers' pass-through of a nominal exchange-rate change, without observing wholesale prices or firms' marginal costs. I conduct counterfactual experiments to quantify how the change affects domestic and foreign firms' profits and domestic consumer welfare. The counterfactual experiments show that foreign manufacturers bear more of the cost of an exchange-rate change than do ...
Staff Reports , Paper 179

Working Paper
Markups and misallocation with trade and heterogeneous firms

With non-homothetic preferences, a monopolistic competition equilibrium is inefficient in the way inputs are allocated towards production. This paper quantifies a gains from trade component that is present only when reallocation is properly measured in a setting with heterogeneous firms that charge variable markups. Due to variable markups, reallocations initiated by aggregate shocks impact allocative efficiency depending on the adjustment of the market power distribution. My measurement compares real income growth with the hypothetical case of no misallocation in quantities. Using firm and ...
Globalization Institute Working Papers , Paper 251

Working Paper
Exchange rate pass-through, domestic competition and inflation -- evidence from the 2005/08 revaluation of the Renminbi

How important is the effect of exchange rate fluctuations on the competitive environment faced by domestic firms and the prices they charge? To answer this question, this paper examines the 17 percent appreciation of the yuan against the U.S. dollar from 2005 to 2008. In a monthly panel covering 110 sectors, a 1 percent appreciation of the Yuan increases U.S. import prices by roughly 0.8 percent. It is then shown that import prices, in turn, pass through into producer prices at an average rate of roughly 0.7, implying that a 1 percent Yuan appreciation increases the average U.S. producer ...
Globalization Institute Working Papers , Paper 68

Journal Article
The Economic Effects of the 2018 U.S. Trade Policy: A State-Level Analysis

We evaluate, empirically, the effect of changes in trade policy during the 2018-19 trade war on U.S. economic activity. We begin by documenting that sectors and states across the United States are heterogeneous in their exposure to international trade. To do that, we construct a measure of exposure that combines the share of a sector’s gross output that is accounted for by trade with the pattern of comparative advantage of each state in that sector. We then exploit cross-state heterogeneity in exposure to international trade and correlate it with measures of economic activity across U.S. ...
Review , Volume 102 , Issue 4 , Pages 385-412

Working Paper
Terror Externalities and Trade: An Empirical Analysis

We report robust evidence of adverse cross-border externalities from terrorism on trade for over 160 countries from 1976 to 2014. Terrorism in one country spills over to reduce trade in neighboring nations. These externalities arise from higher trade costs due to trade delays and macroeconomic uncertainty.
Working Papers , Paper 2019-17

Working Paper
\"It's Not You, It's Me\" : Breakups in U.S.-China Trade Relationships

Costs to switching suppliers can affect prices by discouraging buyer movements from high to low cost sellers. This paper uses confidential U.S. Customs data on U.S. importers and their Chinese exporters to investigate these costs. I find considerable barriers to supply chain adjustments: 45% of arm?s-length importers keep their partner, and one-third of switching importers remain in the same city. Guided by these regularities, I propose and structurally estimate a dynamic discrete exporter choice model. Cost estimates are large and heterogeneous across products. These costs matter for trade ...
International Finance Discussion Papers , Paper 1165

Working Paper
The Effects of Terror on International Air Passenger Transport: An Empirical Investigation

This paper presents a theoretical model (adapted from the structural gravity model by Anderson and van Wincoop, 2003) to capture the effects of terrorism on air passenger traffic between nations affected by terrorism. We then use equations derived from this model, in conjunction with alternative functional forms for trade costs, to estimate the effects of terrorism on bilateral air passenger flows from 57 source countries to 25 destination countries for the period of 2000 to 2014. We find that an additional terrorist incident results in approximately a 1.2% decrease in the bilateral air ...
Working Papers , Paper 2017-2

Journal Article
U.S. international transactions in 1997

The U.S. current account deficit widened further in 1997, reaching $166 billion. U.S. imports of goods continued to exceed exports by a substantial margin. However, goods trade accounted for only a small part of the deterioration in the current account balance last year. The shift of investment income from positive to negative (the first time since 1914) was the major contributing factor; it reflected the cumulative effect of deficits in the current account that have persisted since 1982 and the balancing net capital inflows. The financial crises in Asia in the second half of 1997 visibly ...
Federal Reserve Bulletin , Volume 84 , Issue May

Journal Article
U.S. international transactions in 1998

U.S. external deficits widened substantially in 1998 because of the disparity between the rapid pace of U.S. economic growth and sluggish growth abroad and also because of the decline in the price competitiveness of U.S. goods associated with the appreciation of the dollar. The nominal current account deficit reached $233 billion in 1998, compared with $155 billion in 1997; the 1998 deficit was 2.7 percent of U.S. gross domestic product, the largest share since 1987. Most of the widening in the deficit was in trade in goods and services. The financial crises in Asia that emerged in the second ...
Federal Reserve Bulletin , Volume 85 , Issue May

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

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