Market Access, Openness and Growth

This paper identifies a causal effect of openness to international trade on growth. It does so by using tariff barriers of the United States as instruments for the openness of developing countries. Trade liberalization by a large trading partner causes an expansion in the trade of other countries. Trade expansion induced by greater market access appears to cause a quantitatively large acceleration in the growth rates of developing countries. Eliminating existing developed world tariffs would increase developing country trade to GDP ratios by one third and growth rates by 0.6 to 1.6 percent per annum.

U.S. Imports, Exports, and Tariff Data, 1989-2001

This paper describes the updating of the NBER trade dataset, which now provides U.S. import and export values to the year 2001, disaggregated by Harmonized System (HS), Standard International Trade Classification (SITC), and the U.S. Standard Industrial Classification (SIC) categories. In addition, U.S. tariff data at the HS level have been added for the years 1989-2001. Earlier CD-ROMs distributed by the NBER described data on U.S. imports and exports from 1972-1994, and these values have been slightly modified for 1989-1994 and then updated to 2001. Together with the earlier data, there are now 30 years of disaggregate U.S. trade data available to researchers. These data, along with the tariff information for 1989-2001, are all available over the internet at www.nber.org/data/.

Trade and the global recession

The ratio of global trade to GDP declined by nearly 30 percent during the global recession of 2008-2009. This large drop in international trade has generated significant attention and concern. Did the decline simply reflect the severity of the recession for traded goods industries? Or alternatively, did international trade shrink due to factors unique to cross border transactions? This paper merges an input-output framework with a gravity trade model and solves numerically several general equilibrium counterfactual scenarios which quantify the relative importance for the decline in trade of the changing composition of global GDP and changes in trade frictions. Our results suggest that the relative decline in demand for manufactures was the most important driver of the decline in manufacturing trade. Changes in demand for durable manufactures alone accounted for 65 percent of the cross-country variation in changes in manufacturing trade/GDP. The decline in total manufacturing demand (durables and non-durables) accounted for more than 80 percent of the global decline in trade/GDP. Trade frictions increased and played an important role in reducing trade in some countries, notably China and Japan, but decreased or remained relatively flat in others. Globally, the impact of these changes in trade frictions largely cancel each other out.

Issues in Modelling Monetary Policy

This paper reviews issues in the econometric modelling of monetary policy in the light of recent experience and research. Two main sets of issues are covered: first, the operation of policy including the specification of the instrument and objectives; and second, the transmission of monetary policy effects to the wider economy. There is also a discussion of the inherent limitations on the ability to quantify the role of monetary policy in econometric models.

Essays in international trade

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2001."June 2001."Includes bibliographical references.This thesis is a collection of essays on the effect of trade costs on international trade. Chapter 1 derives and empirically examines how factor proportions determine the structure of commodity trade when international trade is costly. It combines a many-country version of the Heckscher-Ohlin model with a continuum of goods developed by Dornbusch-Fischer-Samuelson (1980) with the Krugman (1980) model of monopolistic competition and transport costs. The commodity structure of production and bilateral trade is fully determined. Two main predictions emerge. There is a quasi-Heckscher-Ohlin prediction. Countries capture larger shares of industries that more intensively use their abundant factor. There is a quasi-Rybczynski effect. Countries that rapidly accumulate a factor see their production and export structures systematically move towards industries that intensively use that factor. Both predictions receive support from the data. Factor proportions appear to be an important determinant of the structure of international trade. Chapter 2 focuses on the effect of preferential tariff liberalization on the direction of trade and suggests that NAFTA has had a substantial impact on North American trade. The chapter focuses on where the US sources its imports of different commodities from. It identifies the impact of NAFTA by exploiting the substantial cross-commodity variation in the tariff preference given to goods produced in Canada and Mexico.(cont.) Canada and Mexico have greatly increased their share of US imports of commodities for which they enjoy a tariff preference. For commodities where no preference is given, Canada's share has declined while Mexico's has increased much more modestly. The empirical results suggest that Canada's share of US imports may have declined without NAFTA, rather than increased, while the growth in Mexico's share of US imports would have been much slower. Useful products of the empirical work are estimates of consumer willingness to substitute between different varieties of the same commodity. The estimated average elasticities of substitution range from 5 to 7. Chapter 3 examines the effect of international trade costs on the volume of trade. It extends the model in Chapter 1 to allow trade costs to vary by country and commodities. An arbitrary country imports more commodities from countries where bilateral trade costs are lower, and imports more from larger countries. It also sources specific commodities disproportionately from trading partners that possess in relative abundance the productive factors that are used relatively intensively in the production of that commodity. Useful products of the empirical examination are estimates of the willingness to substitute between different varieties of goods within an industry. The implied elasticities of substitution are mostly high, typically ranging between 6 and 16. With such high elasticities of substitution, small costs to international trade will sharply reduce trade volumes.by John Romalis.Factor proportions and the structure of commodity trade -- NAFTA's impact on North American trade -- International trade costs and the structure of international trade.Ph.D

External Influences on Output: An Industry Analysis

The correlation of Australian output with that of the OECD, and the United States in particular, has been well documented. This paper explores foreign linkages by looking at the production side of the national accounts for Australia and the United States, which is often characterised as the country at the technological frontier. Industrial structures in the two countries are broadly similar, and about two-thirds of Australian output is found to be linked to that of the United States. The US links in the agricultural and mining sectors seem to be related to aggregate demand in the United States, in both the short and long run. But in manufacturing – and notably in goods for which production is technology intensive and changing over time – there are persistent, long-run links with the corresponding sector in the United States. Combined with other evidence, the conjecture is that the US links in manufacturing are driven by the supply-side: technological change, innovation and new products are transmitted from the United States and elsewhere to Australia, mostly within two to three years. Domestic demand seems to dominate service sectors, although US aggregate demand can be relevant, as, for example, in the finance and property sector. While links with the United States are pervasive, domestic events and policies are shown to be important to economic outcomes, particularly in the short to medium term.

The Lags of Monetary Policy

The length of the transmission lags from monetary policy to output has been the subject of much research over the years, but there are serious problems in isolating the lags with any precision. This paper uses a simple model of Australian output to estimate the length of the lags, and then examines how attempts to grapple with the estimation problems might change the results. We estimate that output growth falls by about one-third of one per cent in both the first and second years after a one percentage point rise in the short-term real interest rate, and by about one-sixth of one per cent in the third year. This implies an average lag of about five or six quarters in monetary policy’s impact on output growth. Each of these estimates is, however, subject to considerable uncertainty. We discuss the implications for policy of these relatively long and uncertain lags. Finally, we find no evidence that the average lag from monetary policy to output growth has become any shorter in the 1990s.

Trade and the Global Recession

Global trade fell 30 percent relative to GDP during the Great Recession of 2008-2009. Did this collapse result from factors impeding international transactions or did it simply reflect the greater severity of the recession in highly traded sectors? We answer this question with detailed international data, interpreted within a general-equilibrium trade model. Counterfactual simulations of the model show that a shift in spending away from manufactures, particularly durables, accounts for more than 80 percent of the drop in trade/GDP. Increased trade impediments reduced trade in some countries, but globally the impact of these changes largely cancels out.

A Geometric Approach to CP Violation: Applications to the MCPMFV SUSY Model

We analyze the constraints imposed by experimental upper limits on electric dipole moments (EDMs) within the Maximally CP- and Minimally Flavour-Violating (MCPMFV) version of the MSSM. Since the MCPMFV scenario has 6 non-standard CP-violating phases, in addition to the CP-odd QCD vacuum phase \theta_QCD, cancellations may occur among the CP-violating contributions to the three measured EDMs, those of the Thallium, neutron and Mercury, leaving open the possibility of relatively large values of the other CP-violating observables. We develop a novel geometric method that uses the small-phase approximation as a starting point, takes the existing EDM constraints into account, and enables us to find maximal values of other CP-violating observables, such as the EDMs of the Deuteron and muon, the CP-violating asymmetry in b --> s \gamma decay, and the B_s mixing phase. We apply this geometric method to provide upper limits on these observables within specific benchmark supersymmetric scenarios, including extensions that allow for a non-zero \theta_QCD.Comment: 34 pages, 16 eps figures, to appear in JHE