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Jel Classification:F62 

Working Paper
Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers

Protectionist sentiments have been rising globally in recent years. The consequences of a surge in protectionist measures present policy challenges for emerging markets (EMs), which have become increasingly exposed to global trade. This paper serves two main purposes. First, we collect several stylized facts that characterize EMs' role in the new geography of trade. We focus on differences between advanced economies (AEs) and EMs in trade linkages, production structures, and factor supplies. Second, we build a dynamic, general equilibrium, quantitative trade model featuring multiple ...
International Finance Discussion Papers , Paper 1278

Working Paper
Globalization, market structure and inflation dynamics

The decline in the sensitivity of inflation to domestic slack observed in developed countries since the mid 1980?s has been often attributed to globalization. However, this intuition has so far not been formalized. I develop a general equilibrium setup in which the sensitivity of inflation to marginal cost decreases when international trade costs fall. In order to do so, I add three ingredients to an otherwise standard two-country new-Keynesian model. Strategic interactions generate a time varying desired markup; endogenous entry and heterogeneous productivity engender a self-selection of the ...
Globalization Institute Working Papers , Paper 289

Working Paper
Exploring the Nexus Between Inflation and Globalization Under Inflation Targeting Through the Lens of New Zealand’s Experience

We investigate empirically the inflation dynamics in New Zealand, a small open economy and a pioneer in inflation targeting, under various open-economy Phillips curve specifications. Our forecasting exercise suggests that open-economy Phillips curves under standard measures of global slack do not help forecast domestic inflation, possibly indicating measurement problems with global slack itself. In turn, under a stable inflation target we still find that (i) global inflation and (ii) global inflation and oil prices have information content for headline CPI and core CPI inflation over the ...
Globalization Institute Working Papers , Paper 308

Working Paper
On the Heterogeneous Welfare Gains and Losses from Trade

How are the gains and losses from trade distributed across individuals within a country? First, we document that tradable goods and services constitute a larger fraction of expenditures for low-wealth and low-income households. Second, we build a trade model with nonhomothetic preferences?to generate the documented relationship between tradable expenditure shares, income, and wealth?and uninsurable earnings risk?to generate heterogeneity in income and wealth. Third, we use the calibrated model to quantify the differential welfare gains and losses from trade along the income and wealth ...
Working Papers , Paper 201906R2

Report
The competitiveness of U.S. manufacturing

We study the competitiveness of U.S. manufacturing. For the period 1999?2012 we find little support for a significant offshoring reversal. We show that the share of domestic demand that is met by imports and the terms of trade show no signs of reversal, even in sectors dominated by imports from China. We do, however, find some evidence consistent with the U.S. shale-gas energy revolution raising the competiveness of U.S. energy-intensive sectors.
Current Policy Perspectives , Paper 14-3

Working Paper
A Theory of Economic Unions: A Comment

Gino Gancia, Giacomo Ponzetto and Jaume Ventura have written an extremely interesting paper on a topic that is very timely for the global economy. In this article, I will first argue that GPV have succeeded in formalizing their hypothesis, and that while providing very suggestive analytical results, additional work can and should be done with the model, especially with regards to relative changes in the relative weights of incumbent countries. Second, I will comment on the potential insights if the rest of the world is modeled more realistically. Third, I will call for extending the baseline ...
Working Papers , Paper 2019-35

Working Paper
On the Heterogeneous Welfare Gains and Losses from Trade

How are the gains and losses from trade distributed across individuals within a country? First, we document that tradable goods and services constitute a larger fraction of expenditures for low-wealth and low-income households. Second, we build a trade model with nonhomothetic preferences?to generate the documented relationship between tradable expenditure shares, income, and wealth?and uninsurable earnings risk?to generate heterogeneity in income and wealth. Third, we use the calibrated model to quantify the differential welfare gains and losses from trade along the income and wealth ...
Working Papers , Paper 201906R

Working Paper
The Globalisation of Inflation: the Growing Importance of Global Value Chains

Greater international economic interconnectedness over recent decades has been changing inflation dynamics. This paper presents evidence that the expansion of global value chains (GVCs), ie cross-border trade in intermediate goods and services, is an important channel through which global economic slack influences domestic inflation. In particular, we document the extent to which the growth in GVCs explains the established empirical correlation between global economic slack and national inflation rates, both across countries and over time. Accounting for the role of GVCs, we also find that ...
Globalization Institute Working Papers , Paper 300

Working Paper
Trilemma, not dilemma: financial globalisation and Monetary policy effectiveness

We investigate whether the classic Mundell-Flemming "trilemma" has morphed into a "dilemma" due to financial globalisation. According to the dilemma hypothesis, global financial cycles determine domestic financial conditions regardless of an economy's exchange rate regime and monetary policy autonomy is possible only if capital mobility is restricted. We find that global financial cycles indeed reduce domestic monetary policy effectiveness in more financially integrated economies. However, we also find that another salient feature of financial globalisation has the opposite effect and ...
Globalization Institute Working Papers , Paper 222

Working Paper
Saving Europe?: The Unpleasant Arithmetic of Fiscal Austerity in Integrated Economies

What are the macroeconomic effects of tax adjustments in response to large public debt shocks in highly integrated economies? The answer from standard closed-economy models is deceptive, because they underestimate the elasticity of capital tax revenues and ignore cross-country spillovers of tax changes. Instead, we examine this issue using a two-country model that matches the observed elasticity of the capital tax base by introducing endogenous capacity utilization and a partial depreciation allowance. Tax hikes have adverse effects on macro aggregates and welfare, and trigger strong ...
Working Paper Series , Paper WP-2014-13

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