Search

Begin New Search Political Geography Global Focus Content Type Working Paper Publication Year within 3 Years Publication Year within 25 Years

311. Timely measurement of real effective exchange rates

Author:
Zsolt Darvas
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
We demonstrate that short-run real exchange effective rate changes are dominated by nominal effective exchange rate changes, while inflation rates are sticky and contribute little to short-run real exchange rate changes. These observations allow a rather accurate real-time approximation of the real effective exchange rate using actual nominal exchange rate data and forecast inflation data. We measure the approximation error and find it is minor for most countries and sizeable only for a few countries experiencing high and volatile inflation. For a set of countries, the revision in our estimates using real-time data is slightly lower than the revision in World Bank estimates and much lower than International Monetary Fund estimates. By considering two widely studied economic issues, unit root testing in real exchange rates and nominal exchange rate forecasting with the real exchange rate, we find that using a version of real exchange rates based on approximated monthly price level data instead of actual price level data hardly changes the conclusions on unit roots and forecasting. By combining alternative data sources for exchange rates and consumer prices, we calculate up-to-date monthly real effective exchange rates for 177 countries and the euro area. Our dataset, which is frequently updated, includes more than twice as many observations as the second most comprehensive dataset.
Topic:
Economy, Inflation, and Exchange Rates
Political Geography:
Global Focus

312. Climate-related Security Risks in the 2020 Updated Nationally Determined Contributions

Author:
Elise Remling and Amar Causevic
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Stockholm International Peace Research Institute
Abstract:
Nationally determined contributions (NDCs) are the central instrument for states to communicate their con­tribution to the 2016 Paris Agreement on climate change and reflect their wider approach to climate mitigation and adaptation. This SIPRI Insights paper analyses how the 2020 updated NDCs (16 submissions as of October 2020) discuss climate-related security risks and compares them with 2015. It finds that climate change is mainly seen as a risk to socio-economic development and human security and almost never as a risk to societal stability or the functioning of the state. The assessment of risks in NDCs largely focuses on direct climate impacts. This suggests that countries are currently not considering the risks from indirect climate impacts, including those that cross national borders, or the unintended adverse con­sequences of adaptation or mitigation responses. Going forward, countries will need to take account of the multi­faceted and transboundary character of climate risks in their NDCs in order to meet global expectations and goals.
Topic:
Security, Climate Change, Development, Risk, and Peace
Political Geography:
Global Focus

313. Artificial Intelligence for Social Good: Avoiding the Solutionist Trap

Author:
Andreas Tsamados
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
Artificial Intelligence (AI) is slowly moving past the public bewilderment phase that is common to most revolutionary technologies. In the past decade, AI has often been portrayed as either a sentient technology with an apocalyptic destiny, or as a silver bullet for most if not all conceivable problems ranging from the climate emergency to global crime prevention. This article contributes to a more recent and realistic assessment that is beginning to see the light: AI is a powerful technology that can help us address a wide range of well-defined problems given proper design, development, integration and monitoring.
Topic:
Science and Technology, Innovation, and Artificial Intelligence
Political Geography:
Global Focus

314. How Do Immigrants Promote Exports?

Author:
Gianluca Orefice, Hillel Rapoport, and Gianluca Santoni
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
How does immigration affect export performance? To answer this question, we propose a unified empirical framework allowing to disentangle various mechanisms put forth in previous literature. These include the role of networks in reducing bilateral transaction costs as well as productivity shifts arising from migration-induced knowledge diffusion and increased workforce diversity. While we find evidence supporting all three channels (at both the intensive and the extensive margins of trade), our framework allows to gauge their relative importance. We then focus on diversity and find stronger results in sectors characterized by more complex production processes and more intense teamwork cooperation. This is consistent with theories linking the distribution of skills to the comparative advantage of nations. The results are robust to using a theoretically grounded IV approach combining three variations on the shift share methodology.
Topic:
Labor Issues, Immigration, Immigrants, Diversity, and Trade
Political Geography:
Global Focus

315. Better Two Eyes than One: A Synthesis Classification of Exchange Rate Regimes

Author:
Cécile Couharde and Carl Grekou
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper proposes a new de facto classification of exchange rate regimes, the synthesis classification. The proposed framework has several advantages over existing de facto classifications. First, it offers a unified framework based on the most divergent classifications, the RR and LYS classifications, leading not only to a broader coverage but also to encompass a broad spectrum of exchange systems. Second, it fits better with the known history of exchange rate regimes developments in the post-Bretton Woods era. Among others, it brings an interesting nuance to the so-called hollowing-out hypothesis by showing that the evolution of de facto regimes —especially in emerging economies since the late 1990s— has essentially involved movement toward more tightly “managed” intermediate regimes and not a shift away from such regimes. As an illustration of the insightfulness of our classification, we empirically revisit the nexus between currency crises and exchange rate regimes. In addition to associate a higher probability of currency crisis to both intermediate and floating regimes, our classification, also displays better statistical performances than other classifications in predicting currency crises.
Topic:
Economics, International Cooperation, International Trade and Finance, Exchange Rate Policy, and Currency
Political Geography:
Global Focus

316. The Impact of Common Law on the Volume of Legal Services: An International Study

Author:
Enzo Dia and Jacques Melitz
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
We show that the heavy use of legal services relative to output in the US is not a peculiarity of the country but applies to common law countries in general. It stems largely from better ability to contract and easier access to justice. Yet in close association, common law also opens significantly more room for rentseeking by lawyers than civil law. Thereby the costs could outweigh the benefits. Both real GDP per capita and openness emerge as further factors making room for lawyers.
Topic:
International Cooperation, International Law, Labor Issues, and Law
Political Geography:
Global Focus

317. Love of Variety and Gains from Trade

Author:
Christophe Gouel and Sébastien Jean
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper shows how gains from trade are conditioned by love of variety, defined as the extent to which an additional product variety generates benefits in either final or intermediate consumption. We develop a multi-country, multisector gravity trade model where love of variety is parameterized separately from product substitutability using a generalized CES demand function, and show analytically how gains from trade depend on love of variety through different channels that we identify and interpret. In this context, except for very specific parameterizations, gains from trade differ between a heterogeneous- and a homogeneous-firm model. Counterfactual simulations based on a calibrated version of this model show that, all other things being equal, the assessed gains from trade commonly vary by a proportion of one to three depending on the value of the love-of-variety elasticity, in a way that differs significantly across countries. Trade war simulations also point to the strong sensitivity of the assessed impacts. We conclude that love of variety is a key determinant of the gains from trade, an aspect that has so far been overlooked for the sake of convenience in the modeling framework and due to lack of empirical estimates.
Topic:
International Cooperation, International Trade and Finance, Trade Wars, and Models
Political Geography:
Global Focus

318. Free Trade Agreements and the Movement of Business People

Author:
Thierry Mayer, Hillel Rapoport, and Camilo Umana Dajud
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Many of the measures to contain Covid-19 severely reduced business travel. Using provisions to ease the movement of business visitors in trade agreements, we show that removing barriers to the movement of business people promotes trade. To do this, we first document the increasing complexity of Free Trade Agreements. We then develop an algorithm that combines machine learning and text analysis techniques to examine the content of FTAs. We use the algorithm to determine which FTAs include provisions to facilitate the movement of business people and whether those provisions are included in dispute settlement mechanisms. Using these data and accounting for the overall depth of FTAs, we show that provisions facilitating business travel indeed facilitate business travel (but not permanent migration) and, eventually, increase bilateral trade flows.
Topic:
International Cooperation, International Trade and Finance, Migration, Business, Free Trade, Pandemic, and COVID-19
Political Geography:
Global Focus

319. Poor Substitutes? Counterfactual methods in IO and Trade compared

Author:
Keith Head and Thierry Mayer
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Constant elasticity of substitution (CES) demand for monopolistically competitive firm-varieties is a standard tool for models in international trade and macroeconomics. Inter-variety substitution in this model follows a simple share proportionality rule. In contrast, the standard toolkit in industrial organization (IO) estimates a demand system in which cross-elasticities depend on similarity in observable attributes. The gain in realism from the IO approach comes at the expense of requiring richer data and greater computational challenges. This paper uses the dataset of Berry et al. 1995, who established the modern IO method, to simulate counterfactual trade policy experiments. We use the CES model as an approximation of the more complex underlying demand system and market structure. Although the CES model omits key elements of the data generating process, the errors are offsetting, leading to reasonably accurate counterfactual predictions. For aggregate outcomes, it turns out that incorporating non-unitary pass-through matters more than fixing over-simplified substitution patterns. We do so by extending the commonly used methods of Exact Hat Algebra and tariff elasticity estimation to take into account oligopoly.
Topic:
Economics, Business, Monopoly, Trade, and Models
Political Geography:
Global Focus

320. Long-Term Macroeconomic Projections of the World Economy

Author:
Lionel Fontagné, Erica Perego, and Gianluca Santoni
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
What will the global economy look like in a generation? The answer depends on the multiple forces driving long-term growth (demography, education, diffusion of technical progress, energy costs, investment and saving behaviour, international capital mobility) and requires a comprehensive framework to conceptualise them. We re-estimate the three-factor (capital, energy, labour) MAcro-econometric model of the Global Economy (MaGE), initially developed by Fouré et al. (2013), with a database covering 170 countries using state-of-the-art methods. We thus establish the long-term structural relationships that drive the dynamics of the World economy. The model projections to 2050 illustrate the expected changes in the World economy and their driving forces. In light of the projected volume of energy consumption, making these projections compatible with climate imperatives calls for increased technology sharing at the international level in order to decouple economic growth from energy use.
Topic:
Economics, Energy Policy, International Trade and Finance, and Macroeconomics
Political Geography:
Global Focus