International Trade, Finance and Development

This chapter highlights the interrelations between countries through trade and finance, and illustrates some of the policy consequences. It presents a short history of exchange rate regimes, illustrates international vehicle currencies, and discusses capital and investment flows. Since the exchange rate is a price, a rise in the exchange rate indicates that the item being traded has become more expensive, just like any other price rise indicates. There are two types of interest rate parity conditions: covered and uncovered. The chapter explains how the choices have changed over time by focusing on the most recent main international monetary regimes. It overviews these regimes, their duration, and the main characteristics: gold standard, world wars and recession, Bretton Woods, floating rates. Almost all countries at some time or another engage in some type of foreign exchange market intervention, through their legal framework, direct intervention, or interest rate policy. The International Monetary Fund identifies ten exchange rate regimes

International Trade, Finance and Development

This chapter highlights the interrelations between countries through trade and finance, and illustrates some of the policy consequences. It presents a short history of exchange rate regimes, illustrates international vehicle currencies, and discusses capital and investment flows. Since the exchange rate is a price, a rise in the exchange rate indicates that the item being traded has become more expensive, just like any other price rise indicates. There are two types of interest rate parity conditions: covered and uncovered. The chapter explains how the choices have changed over time by focusing on the most recent main international monetary regimes. It overviews these regimes, their duration, and the main characteristics: gold standard, world wars and recession, Bretton Woods, floating rates. Almost all countries at some time or another engage in some type of foreign exchange market intervention, through their legal framework, direct intervention, or interest rate policy. The International Monetary Fund identifies ten exchange rate regimes

On the revealed comparative advantages of Dutch cities

Davis and Dingel explain the distributions of skills, occupations, and sectors across cities. Their model predicts that larger cities will be relatively skill-abundant and specialize in skill-intensive activities. This relates the model to factor-driven comparative advantages. They also develop an elasticity test and pairwise comparison test for the spatial distributional implications of the model. What is not analyzed, however, is the associated structure of trade flows. This next step—the analysis of the structure of trade—is the main contribution of our article. We combine micro-economic data to analyze how the sorting process of factors of production across cities determines the revealed comparative advantage (RCA) distributions of Dutch cities. We find that (i) the sorting of factors of production across cities is consistent with Davis and Dingel, (ii) RCA patterns differ significantly across locations, (iii) RCA differences can be explained by the interaction of local skill-abundance and sector skill-intensity (in line with the factor abundance model), and (iv) the RCA analysis relative to the Netherlands mostly, but not always, coincides with that relative to the world

Government institutions and the dynamics of urban growth in China

Economic growth in China in recent decades has largely rested on the dynamism of its cities. High economic growth has coincided with measures aimed at improving the efficiency of local governments and with a mounting political drive to curb corruption. Yet the connection between government institutions and urban growth in China remains poorly understood. This paper is the first to look into the link between government efficiency and corruption, on the one hand, and urban growth in China, on the other hand and to assess what is the role of institutions relative to more traditional factors for economic growth in Chinese cities. Using panel data for 283 cities over the period between 2003 and 2014, the results show that the urban growth in China is a consequence of a combination of favorable human capital, innovation, density, local conditions, foreign direct investment, and city-level government institutions. Both government quality—especially for those cities with the best governments—and the fight against corruption at the city level have a direct effect on urban growth. Measures to tackle corruption at the provincial level matter in a more indirect way, by raising or lowering the returns of other growth-inducing factors