Firm Heterogeneity and the Two Sources of Gains from Trade

Recent empirical work identi.es two main channels through which consumers benefit from trade. Trade liberalization lowers prices, while it raises product variety. This paper develops the first model that connects both channels and interprets their interaction. It shows that heterogeneity in firm productivity is the source behind both. Upon liberalization efficient exporters enter, pushing out the least efficient domestic firms. Two countervailing forces emerge, both stylized facts. Liberalization leaves a moreconcentrated market. But exporters o¤er more variety than the .rms that they replace. Remarkably, total variety unambiguously increases. Exploration of comparative statics leads to an intuitive explanation.Trade, Firm selection, Product Variety, Heterogeneous firms

The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism

This paper argues that the growing US trade de.cit has caused the decline of the WTO and the rise of regional trade agreements. A country in de.cit prefers to retain market power against countries with a large surplus. Multilateral cooperation restricts its choice. This notion is formalized in a three-country game in which countries negotiate multilaterally and, if that fails, bilaterally. The multilateral agreement only holds for sufficiently even trade balances. When one country's deficit grows too large, a regionalist equilibrium emerges. A VAR analysis shows that the US trade balance explains over 50% of the variation in regional trade agreements.Regionalism, RTA, Multilateralism, WTO, Trade balance, US trade deficit

Monetary Policy and Excessive Bank Risk Taking

If monetary policy is to aim at financial stability, how would it change? To analyze this question, this paper develops a general-form model with endogenous bank risk profiles. Policy rates affect both bank incentives to search for yield and the cost of wholesale funding. Financial stability objectives are then shown to make a monetary authority more conservative and more aggressive. Conservative as it sets higher rates on average. And aggressive because, in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. Keeping cuts short is crucial as bank risk responds primarily to stable low rates. Within the short span, cuts then must be deep to achieve standard objectives.Monetary policy;Financial stability

Behind the Scenes of Globalization: Strategic Trade Policy, Firm Decisions and Worker Expectations.

Foreign trade and employment; Investments, Foreign, and employment;

The use of hybrid cellular automaton models for improving cancer therapy, In Proceedings, Cellular Automata: 6th International Conference on Cellular Automata for Research and Industry, ACRI 2004, Amsterdam, The Netherlands, eds P.M.A. Sloot, B. Chopard, A.G. Hoekstra

The Hybrid Cellular Automata (HCA) modelling framework can be an efficient approach to a number of biological problems, particularly those which involve the integration of multiple spatial and temporal scales. As such, HCA may become a key modelling tool in the development of the so-called intergrative biology. In this paper, we first discuss HCA on a general level and then present results obtained when this approach was implemented in cancer research

Will macroprudential policy counteract monetary policy’s effects on financial stability? Bruegel Working Paper Issue 01 / 2018

HHow does monetary policy impact upon macroprudential regulation? This paper models monetary policy’s transmission to bank risk taking, and its interaction with a regulator’s optimization problem. The regulator uses its macroprudential tool, a leverage ratio, to maintain financial stability, while taking account of the impact on credit provision. A change in the monetary policy rate tilts the regulator’s entire trade-off. We show that the regulator allows interest rate changes to partly “pass through” to bank soundness by not neutralizing the risk-taking channel of monetary policy. Thus, monetary policy affects financial stability, even in the presence of macroprudential regulatio

Monetary Policy and Excessive Bank Risk Taking

If monetary policy is to aim at financial stability, how would it change? To analyze this question, this paper develops a general-form model with endogenous bank risk profiles. Policy rates affect both bank incentives to search for yield and the cost of wholesale funding. Financial stability objectives are then shown to make a monetary authority more conservative and more aggressive. Conservative as it sets higher rates on average. And aggressive because, in reaction to negative shocks, cuts are deeper but shorter-lived than otherwise. Keeping cuts short is crucial as bank risk responds primarily to stable low rates. Within the short span, cuts then must be deep to achieve standard objectives.