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  • Author: Maciej Kotowski
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper investigates the formation of production and trading networks in an economy with general interdependencies and complex property rights. The right to exclude,a core tenet of property, grants asset owners a form of monopoly power that influences granular economic interactions. Equilibrium networks reflect the distribution of these ownership claims. Inefficient production networks may endure in equilibrium as firms multi-source to mitigate hold-up risk. Short supply chains also reduce this risk, but may preclude the production of complex goods. A generalized Top Trading Cycles algorithm, applicable to a production economy, identifies equilibrium outcomes in the model. Such outcomes can be decentralized via a price system.
  • Topic: International Trade and Finance, International Affairs, Intellectual Property/Copyright, National & provincial initiatives
  • Political Geography: America
  • Author: Ricardo Hausmann, Patricio Goldstein, Ana Grisanti, Tim O'Brien, Jorge Tapia, Miguel Ajgel Santos
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Jordan faces a number of pressing economic challenges: low growth, high unemployment, rising debt levels, and continued vulnerability to regional shocks. After a decade of fast economic growth, the economy decelerated with the Global Financial Crisis of 2008-09. From then onwards, various external shocks have thrown its economy out of balance and prolonged the slowdown for over a decade now. Conflicts in neighboring countries have led to reduced demand from key export markets and cut off important trade routes. Foreign direct investment, which averaged 12.7% of gross domestic product (GDP) between 2003-2009, fell to 5.1% of GDP over the 2010-2017. Regional conflicts have interrupted the supply of gas from Egypt – forcing Jordan to import oil at a time of record prices, had a negative impact on tourism, and also provoked a massive influx of migrants and refugees. Failure to cope with 50.4% population growth between led to nine consecutive years (2008-2017) of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade (2009-2018). Debt to GDP ratios, which were at 55% by the end of 2009, have skyrocketed to 94%. Over the previous five years Jordan has undertaken a significant process of fiscal consolidation. The resulting reduction in fiscal impulse is among the largest registered in the aftermath of the Financial Crises, third only to Greece and Jamaica, and above Portugal and Spain. Higher taxes, lower subsidies, and sharp reductions in public investment have in turn furthered the recession. Within a context of lower aggregate demand, more consolidation is needed to bring debt-to-GDP ratios back to normal. The only way to break that vicious cycle and restart inclusive growth is by leveraging on foreign markets, developing new exports and attracting investments aimed at increasing competitiveness and strengthening the external sector. The theory of economic complexity provides a solid base to identify opportunities with high potential for export diversification. It allows to identify the existing set of knowhow, skills and capacities as signaled by the products and services that Jordan is able to make, and to define existing and latent areas of comparative advantage that can be developed by redeploying them. Service sectors have been growing in importance within the Jordanian economy and will surely play an important role in export diversification. In order to account for that, we have developed an adjusted framework that allows to identify the most attractive export sectors including services. Based on that adjusted framework, this report identifies export themes with a high potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy. The general goal is to provide a roadmap with key elements of a strategy for Jordan to return to a high economic growth path that is consistent with its emerging comparative advantages.
  • Topic: Government, International Trade and Finance, Finance, Economy
  • Political Geography: Middle East, Jordan
  • Author: Arvind Subramanian, Josh Felman
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: We examine the pattern of growth in the 2010s. Standard explanations cannot account for the long slowdown, followed by a sharp collapse. Our explanation stresses both structural and cyclical factors, with finance as the distinctive, common element. In the immediate aftermath of the Global Financial Crisis (GFC), two key drivers of growth decelerated. Export growth slowed sharply as world trade stagnated, while investment fell victim to a homegrown Balance Sheet crisis, which came in two waves. The first wave—the Twin Balance Sheet crisis, encompassing banks and infrastructure companies—arrived when the infrastructure projects started during India’s investment boom of the mid-2000s began to go sour. The economy nonetheless continued to grow, despite temporary, adverse demonetization and GST shocks, propelled first by income gains from the large fall in international oil prices, then by government spending and a non-bank financial company (NBFC)-led credit boom. This credit boom financed unsustainable real estate inventory accumulation, inflating a bubble that finally burst in 2019. Consequently, consumption too has now sputtered, causing growth to collapse. As a result, India is now facing a Four Balance Sheet challenge—the original two sectors, plus NBFCs and real estate companies—and is trapped in an adverse interest-growth dynamic, in which risk aversion is leading to high interest rates, depressing growth, and generating more risk aversion. Standard remedies are unavailable: monetary policy is stymied by a broken transmission mechanism; large fiscal stimulus will only push up already-high interest rates, worsening the growth dynamic. The traditional structural reform agenda—land and labour market measures—are important for the medium run but will not address the current problems. Addressing the Four Balance Sheet problem decisively will be critical to durably reviving growth. Raising agricultural productivity is also high priority. And even before that, a Data Big Bang is needed to restore trust and enable better policy design.
  • Topic: International Trade and Finance, Economy, Global Political Economy, Economic growth, Global Financial Crisis
  • Political Geography: South Asia, India
  • Author: Jie Bai, Jiahua Liu
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: It is well known that various forms of non-tariff trade barriers exist within a country. Empirically, it is difficult to measure these barriers as they can take many forms. We take advantage of a nationwide VAT rebate policy reform in China as a natural experiment to identify the existence of these intranational barriers due to local protectionism and study the impact on exports and exporting firms. As a result of shifting tax rebate burden, the reform leads to a greater incentive of the provincial governments to block the domestic flow of non-local goods to local export intermediaries. We develop an open-economy heterogenous firm model that incorporates multiple domestic regions and multiple exporting technologies, including the intermediary sector. Consistent with the model’s predictions, we find that rising local protectionism leads to a reduction in interprovincial trade, more “inward-looking” sourcing behavior of local intermediaries, and a reduction in manufacturing exports. Analysis using micro firm-level data further shows that private companies with greater baseline reliance on export intermediaries are more adversely affected.
  • Topic: International Trade and Finance, Political Economy, Reform, Tariffs
  • Political Geography: China, Asia
  • Author: Jie Bai, Panle Barwick, Shengmao Cao, Shanjun Li
  • Publication Date: 11-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Are quid pro quo (technology for market access) policies effective in facilitating knowledge spillover to developing countries? We study this question in the context of the Chinese automobile industry where foreign firms are required to set up joint ventures with domestic firms in return for market access. Using a unique dataset of detailed quality measures along multiple dimensions of vehicle performance, we document empirical patterns consistent with knowledge spillovers through both ownership affiliation and geographical proximity: joint ventures and Chinese domestic firms with ownership or location linkage tend to specialize in similar quality dimensions. The identification primarily relies on within-product variation across quality dimensions and the results are robust to a variety of specifications. The pattern is not driven by endogenous joint-venture network formation, overlapping customer base, or learning by doing considerations. Leveraging additional micro datasets on part suppliers and worker flow, we document that supplier network and labor mobility are important channels in mediating knowledge spillovers. However, these channels are not tied to ownership affiliations. Finally, we calibrate a simple learning model and conduct policy counterfactuals to examine the role of quid pro quo. Our findings show that ownership affiliation facilitates learning but quality improvement is primarily driven by the other mechanisms.
  • Topic: International Trade and Finance, Science and Technology, Developing World
  • Political Geography: China, Asia
  • Author: Jie Bai, Ludovica Gazze, Yukun Wang
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firm’s products could affect the demand of other firms from the same origin country. We study this issue in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging rich firm-product level administrative data and official quality inspection reports, we find that the export revenue of contaminated firms dropped by 84% after the scandal, relative to the national industrial trend, and the spillover effect on non-contaminated firms is measured at 64% of the direct effect. Notably, firms deemed innocent by government inspections did not fare any better than noninspected firms. These findings highlight the importance of collective reputation in international trade and the challenges governments might face in signaling quality and restoring trust. Finally, we investigate potential mechanisms that could mediate the strength of the reputation spillover. We find that the spillover effects are smaller in destinations where people have better information about parties involved in the scandal. New firms are more vulnerable to the collective reputation damage than established firms. Supply chain structure matters especially in settings where firms are less vertically integrated and exhibit fragmented upstream-downstream relationships.
  • Topic: International Trade and Finance, Markets, Business , Global Political Economy, Accountability
  • Political Geography: China, Asia
  • Author: Dani Rodrik
  • Publication Date: 08-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: In a world economy that is highly integrated, most policies produce effects across the border. This is often believed to be an argument for greater global governance, but the logic requires scrutiny. There remains strong revealed demand for policy and institutional diversity among nations, rooted in differences in historical, cultural, or development trajectories. The canonical case for global governance is based on two set of circumstances. The first occurs when there is global public good (GPG) and the second under “beggar-thy-neighbor” (BTN) policies. However, the world economy is not a global commons, and virtually no economic policy has the nature of a global public good (or bad). And while there are some important BTN policies, much of our current discussions deal with policies that are not true BTNs. The policy failures that exist arise not from weaknesses of global governance, but from distortions of domestic governance. As a general rule, these domestic failures cannot be fixed through international agreements or multilateral cooperation. The paper closes by discussing an alternative model of global governance called “democracy-enhancing global governance.”
  • Topic: International Trade and Finance, Governance, Global Political Economy, Trade Wars
  • Political Geography: Global Focus, Global Markets
  • Author: Nathan Converse, Eduardo Levy Yeyati, Tomas Williams
  • Publication Date: 05-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Since the early 2000s exchange-traded funds (ETFs) have grown to become an important in- vestment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fund- level data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging mar- ket funds, we find that the sensitivity of investor flows to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global financial conditions. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the global financial cycle in emerging markets.
  • Topic: Emerging Markets, International Trade and Finance, Global Political Economy, Capital Flows, Mutual Funds
  • Political Geography: Global Focus, Global Markets
  • Author: Mayra Buvinic, Megan O'Donnell
  • Publication Date: 05-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: A review of the recent evaluation evidence on financial services and training interventions questions their gender neutrality and suggests that some design features in these interventions can yield more positive economic outcomes for women than for men. These include features in savings and ‘Graduation’ programs that increase women’s economic self-reliance and self-control, and the practice of repeated micro borrowing that increases financial risk-taking and choice. ‘Smart’ design also includes high quality business management and jobs skills training, and stipends and other incentives in these training programs that address women’s additional time burdens and childcare demands. Peer support may also help to increase financial risk taking and confidence in business decisions, and may augment an otherwise negligible impact of financial literacy training. These features help women overcome gender-related constraints. However, when social norms are too restrictive, and women are prevented from doing any paid work, no design will be smart enough. Subjective economic empowerment appears to be an important intermediate outcome for women that should be promoted and more reliably and accurately measured. More research is also needed on de-biasing service provision, which can be gender biased; lastly, whenever possible, results should be sex-disaggregated and reported for individuals as well as households.
  • Topic: Gender Issues, International Trade and Finance, Global Political Economy
  • Political Geography: Global Focus
  • Author: Nancy Birdsall, Liliana Rojas-Suarez, Anna Diofasi
  • Publication Date: 02-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Despite increasing volatility in the global economy, the uptake of the IMF’s two precautionary credit lines, the Flexible Credit Line (FCL) and the Precautionary and Liquidity Line (PLL), has remained limited—currently to just four countries. The two new lending instruments were created in the wake of the global financial crisis of 2008 to enable IMF member states to respond quickly and effectively to temporary balance of payment needs resulting from external shocks. Both credit lines offer immediate access to considerable sums—over 10 times a country’s IMF quota in some cases with no (FCL) or very limited (PLL) conditionality. This paper addresses four misconceptions (or ‘myths’) that have likely played a role in the limited utilization of the two precautionary credit lines: 1) too stringent qualification criteria that limit country eligibility; 2) insufficient IMF resources; 3) high costs of precautionary borrowing; and 4) the economic stigma associated with IMF assistance. We show, in fact, that the pool of eligible member states is likely to be seven to eight times larger than the number of current users; that with the 2016 quota reform IMF resources are more than adequate to support a larger precautionary portfolio; that the two IMF credit lines are among the least costly and most advantageous instruments for liquidity support countries have; and that there is no evidence of negative market developments for countries now participating in the precautionary lines.
  • Topic: International Trade and Finance, Global Political Economy
  • Political Geography: Global Focus
  • Author: Nora Lustig
  • Publication Date: 01-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Current policy discussion focuses primarily on the power of fiscal policy to reduce inequality. Yet, comparable fiscal incidence analysis for 28 low and middle income countries reveals that, although fiscal systems are always equalizing, that is not always true for poverty. In Ethiopia, Tanzania, Ghana, Nicaragua, and Guatemala the extreme poverty headcount ratio is higher after taxes and transfers (excluding in-kind transfers) than before. In addition, to varying degrees, in all countries a portion of the poor are net payers into the fiscal system and are thus impoverished by the fiscal system. Consumption taxes are the main culprits of fiscally-induced impoverishment. Net direct taxes are always equalizing and indirect taxes net of subsidies are equalizing in nineteen countries of the 28. While spending on pre-school and primary school is pro-poor (i.e., the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e., equalizing but not pro-poor). Health spending is always equalizing but not always pro-poor. More unequal countries devote more resources to redistributive spending and appear to redistribute more. The latter, however, is not a robust result across specifications.
  • Topic: International Trade and Finance, Global Political Economy
  • Political Geography: Global Focus
  • Author: Ali Enami, Nora Lustig, Rodrigo Aranda
  • Publication Date: 01-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: This paper provides a theoretical foundation for analyzing the redistributive effect of taxes and transfers for the case in which the ranking of individuals by pre-fiscal income remains unchanged. We show that in a world with more than a single fiscal instrument, the simple rule that progressive taxes or transfers are always equalizing not necessarily holds, and offer alternative rules that survive a theoretical scrutiny. In particular, we show that the sign of the marginal contribution unambiguously predicts whether a tax or a transfer is equalizing or not.
  • Topic: International Political Economy, International Trade and Finance
  • Political Geography: Global Focus
  • Author: Nora Lustig, Margarita Beneke, José Andrés Oliva
  • Publication Date: 01-2017
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: We conducted a fiscal impact study to estimate the effect of taxes, social spending, and subsidies on inequality and poverty in El Salvador, using the methodology of the Commitment to Equity project. Taxes are progressive, but given their volume, their impact is limited. Direct transfers are concentrated on poor households, but their budget is small so their effect is limited; a significant portion of the subsidies goes to households in the upper income deciles, so although their budget is greater, their impact is low. The component that has the greatest effect on inequality is spending on education and health. Therefore, the impact of fiscal policy is limited and low when compared with other countries with a similar level of per capita income. There is room for improvement using current resources.
  • Topic: International Trade and Finance, Poverty, Income Inequality
  • Political Geography: El Salvador
  • Author: Mikhail Krutikhin
  • Publication Date: 03-2017
  • Content Type: Working Paper
  • Institution: Center for Transatlantic Relations
  • Abstract: This paper is part of CTR's Working Paper Series: "Russia and the West: Reality Check." The nature and shape of the Russian oil and gas industry is not just Moscow’s concern. The ups and downs of Russia’s energy production and exports are factors that affect the global political environment. The influx of revenues from hydrocarbon sales determines the way the Kremlin behaves in the world arena, and the notorious unpredictability of the Russian political leadership becomes even more pronounced when oil prices show an appetite for instability.
  • Topic: International Relations, Energy Policy, International Trade and Finance, Oil, Natural Resources, Gas
  • Political Geography: Russia, United States of America, European Union
  • Author: Dzianis Melyantsou
  • Publication Date: 03-2017
  • Content Type: Working Paper
  • Institution: Center for Transatlantic Relations
  • Abstract: This paper is part of CTR's Working Paper Series: "Eastern Voices: Europe's East Faces an Unsettled West." The new geopolitical environment formed after the annexation of Crimea and the war in the Donbas, together with emerging threats and challenges, are pressing both Belarus and the West to revise their policies in the region as well as their relations with each other. In this new context, Belarus is seeking a more balanced foreign policy and, at least towards the Ukrainian crisis, a more neutral stance.
  • Topic: International Relations, Diplomacy, International Trade and Finance, War, Territorial Disputes, Foreign Aid, Sanctions, Geopolitics
  • Political Geography: Russia, Europe, Ukraine, Belarus, Crimea, United States of America, European Union
  • Author: Natalie A. Jaresko
  • Publication Date: 03-2017
  • Content Type: Working Paper
  • Institution: Center for Transatlantic Relations
  • Abstract: This paper is part of CTR's Working Paper Series: "Eastern Voices: Europe's East Faces an Unsettled West." Once again, the world is grappling with historic challenges, as it did when the Soviet Union fell in 1991, and once more, Ukraine is at the forefront of these challenges. The Kremlin’s attempts to destroy Ukraine’s European aspirations is simply one of Russia's many challenges to the post-World War II international liberal order. The actions of the Kremlin -- be they in Ukraine, Georgia, Moldova, and Syria; in the U.S. electoral process; or in the funding of far-right and far-left political parties throughout Europe -- have but one purpose: to destroy the transatlantic partnership and the principles of the post-World War II order and peace. Ukraine is simply one of the battlegrounds, but it is a key because it is in Europe. Unity of the transatlantic partnership and of the democratic nations is critical. Unity of support for the Ukrainian transition process is a serious part of this battle, because Ukraine’s successful democratic, rule-of-law based transformation is key to ensuring a Europe whole, free and at peace.
  • Topic: International Trade and Finance, Territorial Disputes, Economy, Protests
  • Political Geography: Russia, Europe, Ukraine, Crimea
  • Author: Zsolt Darvas, Dirk Schoenmaker
  • Publication Date: 03-2017
  • Content Type: Working Paper
  • Institution: Bruegel
  • Abstract: Integrated capital markets facilitate risk sharing across countries. Lower home bias in financial investments is an indicator of risk sharing. We highlight that existing indicators of equity home bias in the literature suffer from incomplete coverage because they consider only listed equities. We also consider unlisted equites and show that equity home bias is much higher than previous studies perceived. We also analyse home bias in debt securities holdings, and euro-area bias. We conclude that European Union membership may foster financial integration and reduce information barriers, which sometimes limit cross-country diversification. We calculate home bias indicators for the aggregate of the euro area as if the euro area was a single country and report remarkable similarity between the euro area and the United States in terms of equity home bias, while there is a higher level of debt home bias in the United States than in the euro area as a whole. We develop a new pension fund foreign investment restrictions index to control for the impact of prudential regulations on the ability of institutional investors to diversify geographically across borders. Our panel regression estimates for 25 advanced and emerging countries in 2001-14 provide strong support for the hypothesis that the larger the assets managed by institutional investors (defined as pension funds, insurance companies and investment funds), the smaller the home bias and thereby the greater the scope for risk sharing.
  • Topic: International Political Economy, International Trade and Finance, Economic structure, Europe Union
  • Political Geography: Europe
  • Author: Yakov Ben-Haim, Maria Demertzis, Jan Willem Van Den End
  • Publication Date: 02-2017
  • Content Type: Working Paper
  • Institution: Bruegel
  • Abstract: This paper applies the info-gap approach to the unconventional monetary policy of the Eurosystem and so takes into account the fundamental uncertainty on inflation shocks and the transmission mechanism. The outcomes show that a more demanding monetary strategy, in terms of lower tolerance for output and inflation gaps, entails less robustness against uncertainty, particularly if financial variables are taken into account. Augmenting the Taylor rule with a financial variable leads to a smaller loss of robustness than taking into account the effect of financial imbalances on the economy. However, in some situations, the augmented model is more robust than the baseline model. A conclusion from our framework is that including financial imbalances in the monetary policy objective does not necessarily increase policy robustness, and may even decrease it
  • Topic: Economics, International Political Economy, International Trade and Finance
  • Political Geography: Europe
  • Author: Alexandr Lagazzi, Michal Vít
  • Publication Date: 10-2017
  • Content Type: Working Paper
  • Institution: Europeum Institute for European Policy
  • Abstract: With the past export-led economic growth that has gradually become a tool of Chinese soft power, China showcased globally a powerful and inviting policy of economic power in action, and investment-seeking countries (especially from the Western Balkans) are willing to show their eagerness towards Chinese loans and capital. On the reverse side, China presents itself as an equally eager investor, and can be counted on in all situations, including when Chinese investors picked up projects declined by the EU.
  • Topic: International Trade and Finance
  • Political Geography: Global Focus
  • Author: Jeong Hyung-Gon
  • Publication Date: 06-2017
  • Content Type: Working Paper
  • Institution: Korea Institute for International Economic Policy (KIEP)
  • Abstract: Since the global economic crisis triggered in the United States in 2008, the East Asian economic region has received particular attention as it achieved relatively solid economic growth compared to developed countries, which struggled with recession. The discussion on economic cooperation and economic liberalization within East Asia has mainly focused on the RCEP, with this discussion being led by ASEAN as it calls for ASEAN centrality. ASEAN is currently the second-largest overseas investment destination and second-largest trading partner for South Korea, making it an important partner in economic cooperation for South Korea. Particularly, as China is openly implementing economic retaliatory measures against South Korea for the deployment of THAAD missiles in the nation, South Korea has become more interested in the ASEAN market as it strives to diversify its trade and investment portfolio. Under this background, this research examines the characteristics of ASEAN FDI by income level and doing business conditions, then conducts an empirical analysis of determination factors to draw policy implications for stronger economic cooperation with ASEAN.
  • Topic: International Political Economy, International Trade and Finance
  • Political Geography: Asia
  • Author: Lee Sooyoung
  • Publication Date: 06-2017
  • Content Type: Working Paper
  • Institution: Korea Institute for International Economic Policy (KIEP)
  • Abstract: The last decade of the world trade has been marked by an unprecedented collapse, quick recovery, slowdown, another drop, and recovery. To study cyclical and structural aspects of the recent trend of trade, I use both aggregate and disaggregated trade statistics of a small open economy, South Korea, whose economic success and growth have been heavily dependent on exports. The aggregate trend of the country is surprisingly similar to that of the world, which is why the trend of Korea's export is called a proxy for the world. I show that while the last drop of trade after 2015 has cyclical aspects, there is evidence that the continued slowdown from 2012 is structural: (1) the so-called `China factor' is found in the analysis of trade-income elasticity of the world and China for imports from Korea. (2) The bilateral trade barriers between Korea and its important trading partners are universally tightening. I also show that the firm sizes, destination countries, and the mode of transactions affect disaggregated trade flows during the slowdown periods. It is advisable to diversify main export products to lower the effect of oil prices on export prices and to strengthen the cooperation with ASEAN countries, whose trade barriers have exceptionally diminished throughout the last decade.
  • Topic: International Political Economy, International Trade and Finance
  • Political Geography: Asia
  • Author: Kim Sujin
  • Publication Date: 05-2017
  • Content Type: Working Paper
  • Institution: Korea Institute for International Economic Policy (KIEP)
  • Abstract: Even at near-zero interest rates for a prolonged period since the financial crisis, why has business investment in advanced economies remained persistently below its pre-crisis level? This paper investigates empirically the roots of this investment puzzle from the global megatrend perspective. The empirical model of this study augmented the uncertainty-finance accelerator investment model with megatrend variables of a transition to service industry, ageing population and a rise in income inequality. The main estimation results show that they have affected negatively the business investment over the period 1980-2014. The shift-to-service driven investment fall is the price-dominant effect during the transition, which is not necessarily pessimistic news, while the suppressing effects from ageing and a rise in income inequality require adequate policy reactions. In addition, the analysis finds significant negative spillover effects of trade partners' ageing and income inequality on a country's own private investment. Based on the empirical results, I expect that the G20’s efforts in inclusiveness with structural reforms will stimulate global business investment.
  • Topic: International Political Economy, International Trade and Finance
  • Political Geography: Asia
  • Publication Date: 11-2017
  • Content Type: Working Paper
  • Institution: Centre for East European Studies, University of Warsaw
  • Abstract: Every year the World Association of Investment Promotion Agencies (WAIPA) surveys its members. This survey, conducted in 2017, polled over 90 agencies on numerous aspect
  • Topic: International Political Economy, International Trade and Finance
  • Political Geography: Global Focus