Search Results
Journal Article
Durable goods and the collapse of global trade
Global trade has experienced a stunning collapse in the current recession, with the World Trade Organization estimating a decrease of roughly 9 percent in 2009--the biggest contraction since the Second World War. The swift decline caused substantial damage to the global economy, hitting Japan and other countries with large trade sectors especially hard. It also raised concerns that the trade collapse would worsen the global recession and delay recovery. ; Several factors contributed to the global trade collapse. However, the ultimate causes are tied to the global financial crisis that started ...
Working Paper
The Taylor rule and forecast intervals for exchange rates
This paper attacks the Meese-Rogoff (exchange rate disconnect) puzzle from a different perspective: out-of-sample interval forecasting. Most studies in the literature focus on point forecasts. In this paper, we apply Robust Semi-parametric (RS) interval forecasting to a group of Taylor rule models. Forecast intervals for twelve OECD exchange rates are generated and modified tests of Giacomini and White (2006) are conducted to compare the performance of Taylor rule models and the random walk. Our contribution is twofold.> ; First, we find that in general, Taylor rule models generate tighter ...
Working Paper
Lottery-related anomalies: the role of reference-dependent preferences
Previous empirical studies find that lottery-like stocks significantly underperform their nonlottery-like counterparts. Using five different measures of the lottery features in the literature, we document that the anomalies associated with these measures are statedependent: the evidence supporting these anomalies is strong and robust among stocks where investors have lost money, while among stocks where investors have gained profits, the evidence is either weak or even reversed. Several potential explanations for such empirical findings are examined and we document support for the explanation ...
Discussion Paper
Exchange rate pass-through into U.K. import prices: evidence from disaggregated data
In this paper we estimate the rate of exchange rate pass-through (ERPT) into U.K. import prices using disaggregated data at the SITC-2 and SITC-3 digit levels. We show that the ERPT varies at the disaggregate level. Because of this heterogeneity at the disaggregate level, the estimate of the ERPT using aggregate data is found substantially upward-biased in our U.K. data. The upward bias exaggerates the impact of exchange rate movements on the competitiveness of imported goods relative to domestically produced goods. Further, we investigate the source of the heterogeneity of the ERPT at the ...
Journal Article
Asia recalls 1997 crisis as investors await Fed tapering
Asian economies now appear better positioned to deal with adverse external financial shocks.
Journal Article
China's slowdown may be worse than official data suggest
To get a more accurate picture of China's economy, economists examine other measures of activity that closely track growth but are less prone to political interference than output data. Industrial electricity consumption, a major production input, serves as such a proxy.
Working Paper
Understanding the effect of productivity changes on international relative prices: the role of news shocks
The terms of trade and the real exchange rate of the US appreciate when the US labor productivity increases relative to the rest of the world. This finding is at odds with predictions from standard international macroeconomic models. In this paper, we find that incorporating news shocks to total factor productivity (TFP) in an otherwise standard dynamic stochastic general equilibrium (DSGE) model with variable capital utilization can help the model replicate the above empirical finding. Labor productivity increases in our model after a positive news shock to TFP because of an increase in ...
Report
Understanding Trade, Exchange Rates and International Capital Flows
Global trade collapsed following the financial crisis in 2008?09. Imports and exports plunged in major trade countries, and global trade suffered the biggest contraction since World War II.
Working Paper
International trade in durable goods: understanding volatility, cyclicality, and elastics
Data for OECD countries document: 1. imports and exports are about three times as volatile as GDP; 2. imports and exports are pro-cyclical, and positively correlated with each other; 3. net exports are counter-cyclical. Standard models fail to replicate the behavior of imports and exports, though they can match net exports relatively well. Inspired by the fact that a large fraction of international trade is in durable goods, we propose a two-country two-sector model, in which durable goods are traded across countries.> ; Our model can match the business cycle statistics on the volatility and ...
Journal Article
With reforms in China, time may correct U.S. current account imbalance
The U.S. current account deficit has deepened significantly since the late 1990s. This shortfall?the value of net exports of goods and services, international financial investment net income and transfer payments?was $803 billion at its peak in 2006, or 6 percent of U.S. gross domestic product (GDP). Conversely, China, Germany, Japan and the oil-exporting countries have been running current account surpluses that have risen substantially (Chart 1). This divergence has raised concerns among policymakers, economic researchers and private investors about whether these imbalances are sustainable ...