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Trade Shocks
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Book Synopsis The Response of the Current Account to Terms of Trade Shocks by : Christopher J. Kent
Download or read book The Response of the Current Account to Terms of Trade Shocks written by Christopher J. Kent and published by International Monetary Fund. This book was released on 2003-07-01 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Is the relationship between the current account balance and the terms of trade affected by the persistence of terms of trade shocks? In intertemporal models of the current account that incorporate a consumption-smoothing and an investment response to shocks, the effect of the terms of trade on external balances is predicted to be dependent on the duration of terms of trade shocks. Using a median-unbiased estimator, an unbiased model-selection rule, and terms of trade data for 128 countries over the period 1960-99 we identify two groups of countries-those that typically experience temporary terms of trade shocks and those that typically experience permanent terms of trade shocks. The results from panel-data regressions of the two groups of countries support the theoretical predictions of the intertemporal approach to the current account. We find that the greater (lesser) the persistence of the terms of trade shock, the more (less) the investment effect dominates the consumption-smoothing effect on saving, so that the current account balance moves in the opposite (same) direction as that of the shock.
Book Synopsis China and ASEAN: Pivoting Trade and Shock Transmission by : Mala Raghavan
Download or read book China and ASEAN: Pivoting Trade and Shock Transmission written by Mala Raghavan and published by Springer Nature. This book was released on 2021-04-12 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book highlights the critical relationship between China and the Association of Southeast Asian Nations (ASEAN) associated with its trade interdependency. As the largest trade partner in the region, China has not only presented itself with opportunities for ASEAN to tap its market, but also created great challenges for the region. The fundamental question that this book addresses, therefore, is whether China’s engagement with ASEAN comes at a cost for the latter following from the systemic risks tied to the China-centric supply chains in the region. The trade interactions between China and ASEAN, though extensively explored, are less understood in the context of its influence over the region amidst the recent changing dynamics that follow from China’s global engagement and backlash from major powers. The book therefore resolutely rises against stereotypes and clichés, making readers reconsider many oversimplified assumptions of the benefits of trade engagement where economies are interconnected through complex production chains.
Book Synopsis Terms of Trade Shocks and the Current Account by : Mr.Paul Cashin
Download or read book Terms of Trade Shocks and the Current Account written by Mr.Paul Cashin and published by International Monetary Fund. This book was released on 1998-12-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between terms of trade shocks, private saving, and the current account position. The relationship between these variables is theoretically ambiguous: an adverse transitory terms of trade shock can either induce a deterioration or an improvement in the current account, depending on whether the resulting income effects are greater or less than the resulting substitution effects. The substitution effects involve both intertemporally substituting consumption and intratemporally substituting consumption between importables and nontradables. The relative strength of these substitution effects is estimated using data for five OECD countries during 1970/95; both are found to exert large and significant effects on the current account balance.
Book Synopsis Macroeconomic Effects of Terms-of-trade Shocks by : Nikola Spatafora
Download or read book Macroeconomic Effects of Terms-of-trade Shocks written by Nikola Spatafora and published by World Bank Publications. This book was released on 1999 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: January 1995 The authors investigate the impact on economic growth and development of long-run movements in the external terms of trade, with special reference to the experience of 18 oil-exporting countries between 1973 and 1989. They argue that this sample approximates a controlled experiment for examining the impact of unanticipated -- but permanent -- shocks to the terms of trade. They analyze the sample econometrically using panel data techniques. They find that permanent terms-of-trade shocks have a strongly significant positive effect on investment, which they justify theoretically on the grounds that countries in the sample import much of their capital equipment. The shocks also have a significant positive effect on consumption. Government consumption responds almost twice as strongly as private consumption. The shocks have no effect on savings and adversely affect the trade and current account balances. There is a significant positive effect on the output of all main categories of nontradables. But Dutch disease effects are strikingly absent. Agriculture and manufacturing do not contract in reaction to an oil price increase. Dutch disease effects may be absent in part because of policy-induced output restraints in the oil sector, or because of the enclave nature of the oil sector, which does not participate in domestic factor markets.
Book Synopsis Clashing Over Commerce by : Douglas A. Irwin
Download or read book Clashing Over Commerce written by Douglas A. Irwin and published by University of Chicago Press. This book was released on 2017-11-29 with total page 873 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Foreign Affairs Best Book of the Year: “Tells the history of American trade policy . . . [A] grand narrative [that] also debunks trade-policy myths.” —Economist Should the United States be open to commerce with other countries, or should it protect domestic industries from foreign competition? This question has been the source of bitter political conflict throughout American history. Such conflict was inevitable, James Madison argued in the Federalist Papers, because trade policy involves clashing economic interests. The struggle between the winners and losers from trade has always been fierce because dollars and jobs are at stake: depending on what policy is chosen, some industries, farmers, and workers will prosper, while others will suffer. Douglas A. Irwin’s Clashing over Commerce is the most authoritative and comprehensive history of US trade policy to date, offering a clear picture of the various economic and political forces that have shaped it. From the start, trade policy divided the nation—first when Thomas Jefferson declared an embargo on all foreign trade and then when South Carolina threatened to secede from the Union over excessive taxes on imports. The Civil War saw a shift toward protectionism, which then came under constant political attack. Then, controversy over the Smoot-Hawley tariff during the Great Depression led to a policy shift toward freer trade, involving trade agreements that eventually produced the World Trade Organization. Irwin makes sense of this turbulent history by showing how different economic interests tend to be grouped geographically, meaning that every proposed policy change found ready champions and opponents in Congress. Deeply researched and rich with insight and detail, Clashing over Commerce provides valuable and enduring insights into US trade policy past and present. “Combines scholarly analysis with a historian’s eye for trends and colorful details . . . readable and illuminating, for the trade expert and for all Americans wanting a deeper understanding of America’s evolving role in the global economy.” —National Review “Magisterial.” —Foreign Affairs
Book Synopsis Private Saving and Terms of Trade Shocks by : Mr.Jonathan David Ostry
Download or read book Private Saving and Terms of Trade Shocks written by Mr.Jonathan David Ostry and published by International Monetary Fund. This book was released on 1991-10-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between temporary terms of trade shocks and household saving in developing countries. It is first shown that, from a theoretical standpoint, this relationship is ambiguous: private saving may rise or fall in response to a transitory terms of trade shock, depending on the values of the intertemporal elasticity of substitution and the intratemporal elasticity of substitution between traded and nontraded goods. Empirical estimates of these two parameters are obtained using data from a sample of 13 developing countries, and then used to draw implications for the response of private saving to transitory terms of trade shocks.
Book Synopsis International Macroeconomics by : Stephanie Schmitt-Grohé
Download or read book International Macroeconomics written by Stephanie Schmitt-Grohé and published by Princeton University Press. This book was released on 2022-09-06 with total page 482 pages. Available in PDF, EPUB and Kindle. Book excerpt: An essential introduction to one of the most timely and important subjects in economics International Macroeconomics presents a rigorous and theoretically elegant treatment of real-world international macroeconomic problems, incorporating the latest economic research while maintaining a microfounded, optimizing, and dynamic general equilibrium approach. This one-of-a-kind textbook introduces a basic model and applies it to fundamental questions in international economics, including the determinants of the current account in small and large economies, processes of adjustment to shocks, the determinants of the real exchange rate, the role of fixed and flexible exchange rates in models with nominal rigidities, and interactions between monetary and fiscal policy. The book confronts theoretical predictions using actual data, highlighting both the power and limits of given theories and encouraging critical thinking. Provides a rigorous and elegant treatment of fundamental questions in international macroeconomicsBrings undergraduate and master’s instruction in line with modern economic researchFollows a microfounded, optimizing, and dynamic general equilibrium approachAddresses fundamental questions in international economics, such as the role of capital controls in the presence of financial frictions and balance-of-payments crisesUses real-world data to test the predictions of theoretical modelsFeatures a wealth of exercises at the end of each chapter that challenge students to hone their theoretical skills and scrutinize the empirical relevance of modelsAccompanied by a website with lecture slides for every chapter
Download or read book Shock Markets written by Robert I. Webb and published by FT Press. This book was released on 2013-03-26 with total page 297 pages. Available in PDF, EPUB and Kindle. Book excerpt: Don't fear crises: use them as opportunities to make money! Shock Markets shows traders and investors exactly how to do it -- with exceptional detail, not vague handwaving. Robert Webb and Alexander Webb offer meticulous breakdowns of recent crises, revealing how they impacted both individual stocks and the market as a whole -- and helping you create detailed game plans for profiting from future shocks. By fusing real-life trading examples with rigorous moment-by-moment analysis of price changes, they give you tools to survive and thrive in even the most volatile markets. This accessible, actionable book answers crucial questions like: What moves stock prices? What moves the overall market? How can you profit from understanding catalysts that precipitate sudden sharp changes in stock prices? From the actions of corporate executives to regulatory decisions, earnings announcements to merger deals, lawsuits to settlements, macroeconomic reports to the policy actions of foreign governments, seemingly remote factors can have a huge, sudden impact on stocks in today's interconnected markets. Shock Markets illuminates these catalysts, and demonstrates their shifting behavior during fads, fashions, bubbles, crashes, and market crises. The focus is completely practical: helping savvy traders uncover profit where others find only peril.
Book Synopsis Terms-of-Trade Shocks are Not all Alike by : Federico Di Pace
Download or read book Terms-of-Trade Shocks are Not all Alike written by Federico Di Pace and published by INTERNATIONAL MONETARY FUND. This book was released on 2020-12-11 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: When analyzing terms-of-trade shocks, it is implicitly assumed that the economy responds symmetrically to changes in export and import prices. Using a sample of developing countries our paper shows that this is not the case. We construct export and import price indices using commodity and manufacturing price data matched with trade shares and separately identify export price, import price, and global economic activity shocks using sign and narrative restrictions. Taken together, export and import price shocks account for around 40 percent of output fluctuations but export price shocks are, on average, twice as important as import price shocks for domestic business cycles.
Book Synopsis Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries by : Mr.Kangni R Kpodar
Download or read book Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries written by Mr.Kangni R Kpodar and published by International Monetary Fund. This book was released on 2019-03-25 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper contributes to the literature by looking at the possible relevance of the structure of the financial system—whether financial intermediation is performed through banks or markets—for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.
Book Synopsis On the Distributive Effects of Terms of Trade Shocks by : International Monetary Fund
Download or read book On the Distributive Effects of Terms of Trade Shocks written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-10-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce non-tradable goods to the Heckscher-Ohlin-Samuelson (HOS) model to study the distributive effects of terms of trade shocks. We show that the employment of resources in activities producing exclusively for the local market induces a crucial association between domestic spending and factor demand and prices, which is absent in the usual HOS framework. Specifically, in a two-sector economy (producing only exportable and non-tradable goods) there are no redistributive effects of external terms of trade shifts-i.e. no Stolper-Samuelson-type of effect. By extending the model to the domestic production of a third, importable good, we show that distributional tensions arise. Distributional conflicts occur within urban labor groups (skilled vs. unskilled) and not only between the "traditional" rural vs. urban factors. Finally, export taxes are imposed to re-distribute the effects of external shocks. We show that the ability of the government to cushion the impact of the terms of trade shift on the economy’s income distribution depends crucially on the use of the tax revenues.
Download or read book Sticky Feet written by Claire H. Hollweg and published by World Bank Publications. This book was released on 2014-07-03 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report quantifies labor mobility costs in developing countries and simulates the implied adjustment paths of employment and wages following a change in trade policy. High mobility costs are shown to reduce the potential gains to trade reform.
Book Synopsis Assessing the Fragility of Global Trade by : Ms.Yevgeniya Korniyenko
Download or read book Assessing the Fragility of Global Trade written by Ms.Yevgeniya Korniyenko and published by International Monetary Fund. This book was released on 2017-02-13 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Anecdotal evidence suggests the existence of specific choke points in the global trade network revealed especially after natural disasters (e.g. hard drive components and Thailand flooding, Japanese auto components post-Fukushima, etc.). Using a highly disaggregated international trade database we assess the spillover effects of supply shocks from the import of specific goods. Our goal is to identify inherent vulnerabilities arising from the composition of a country’s import basket and to propose effective mitigation policies. First, using network analysis tools we develop a methodology for evaluating and ranking the supply fragility of individual traded goods. Next, we create a country-level measure to determine each country’s supply shock vulnerability based on the composition of their individual import baskets. This measure evaluates the potential negative supply shock spillovers from the import of each good.
Book Synopsis Emerging Economy Business Cycles by : Rudrani Bhattacharya
Download or read book Emerging Economy Business Cycles written by Rudrani Bhattacharya and published by International Monetary Fund. This book was released on 2013-05-22 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the extent to which financial integration impacts the manner in which terms of trade affect business cycles in emerging economies. Using a s mall open economy model, we show that as capital account openness increases in an economy that faces trade shocks, business cycle volatility reduces. For an economy with limited financial openness, and a relatively open trade account, a model with exogenous terms of trade shocks is able to replicate the features of the business cycle.
Book Synopsis Macroeconomic and Sectoral Effects of Terms-of-Trade Shocks by : International Monetary Fund
Download or read book Macroeconomic and Sectoral Effects of Terms-of-Trade Shocks written by International Monetary Fund and published by International Monetary Fund. This book was released on 1999-10-01 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the impact of long-run terms-of-trade shocks. Analytically, we show that, if capital goods are largely importable or the labor supply is sufficiently elastic, then natural-resource booms increase aggregate investment and worsen the current account, but Dutch ‘Disease’ effects are weak. We then examine 18 oil-exporting developing countries during 1965-89. Favorable terms-of-trade shocks increase investment and (especially government) consumption, but reduce medium-term savings; hence, the current account deteriorates. Nontradable output increases, in response to real appreciations, but Dutch Disease effects are strikingly absent. Investment, consumption, and nontradable output respond more to a terms-of-trade decline than to an increase.
Book Synopsis A Noteon Terms of Trade Shocks and the Wage Gap by : International Monetary Fund
Download or read book A Noteon Terms of Trade Shocks and the Wage Gap written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-12-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using Chilean data, we document that for resource-rich small open economies the effects of terms of trade shocks on the wage gap (between skilled and unskilled workers) depend on factor intensities in the non-tradable sector, following the model in Galiani, Heymann, and Magud (2010). For a skilled-intensive non-tradable sector we show that improvements in the terms of trade benefit skilled workers. We also show that this relation holds at the industry level: the wage gap widens in skilled-intensive sectors while it shrinks in unskilled-intensive ones, the more so as terms of trade volatility decreases.
Book Synopsis Terms-of-trade Shocks and Optimal Investment by : Luis Serven
Download or read book Terms-of-trade Shocks and Optimal Investment written by Luis Serven and published by World Bank Publications. This book was released on 1999 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: February 1995 Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, because capital goods imports are excluded from the analytical framework -- an exclusion both arbitrary and unrealistic. Conventional analyses of the effect of terms-of-trade shocks provide a misleading view of their impact on investment and the current account, says Serven, because capital goods imports are excluded from the analytical framework. He argues that such an exclusion is both arbitrary and unrealistic. Serven reexamines the consequences of permanent and transitory changes in the terms of trade in a rational-expectations model of a small open economy with intertemporally optimizing agents, and with trade in both consumption and capital goods. In this framework, the response to a permanent terms of trade improvement is unambiguous: The long-run capital stock, and thus investment, must rise, and the current account must deteriorate -- exactly the opposite of the Laursen-Metzler effect. A transitory improvement in the terms of trade raises saving but has an uncertain effect on investment. So, the impact on the current account is generally ambiguous and is shown to depend on three factors: the import contents of consumption and investment, the duration of the windfall, and the degree of intertemporal substitutability in both consumption and investment. This paper -- a product of the Macroeconomics and Growth Division, Policy Research Department -- is part of a larger effort in the department to understand the macroeconomic impact of policy shifts and external shocks. The author may be contacted at [email protected].
