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on Open Economy Macroeconomic |
| By: | Alan M. Taylor |
| Abstract: | In broad perspective, there have been essentially two competing views of the global financial crisis, albeit there are some complementarities among them. One view looks across the border: it mainly blames external imbalances, the large-scale mix of unprecedented pattern current account deficits and surpluses which entailed massive and growing net and gross international financial flows in the last decade. The alternative view looks within the border: it finds more fault in the domestic arena of the afflicted countries, attributing the problems to financial systems where risks originated in excessive credit booms in local banks. This paper uses the lens of macroeconomic and financial history to confront these dueling hypotheses with evidence. Of the two, the credit boom explanation stands out as the most plausible predictor of financial crises since the dawn of modern finance capitalism in the late nineteenth century. Historically, we find that global imbalances are not as important as a factor in financial crises as is often perceived, and they have much less correlation with subsequent episodes of financial distress compared to direct indicators like credit drawn from the financial system itself. |
| JEL: | E3 E4 E5 F3 F4 N1 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18606&r=opm |
| By: | TengTeng Xu |
| Abstract: | This paper examines the role of bank credit in modeling and forecasting business cycle fluctuations, and investigates the international transmission of US credit shocks, using a global vector autoregressive (GVAR) framework and associated country-specific error correction models. The paper constructs and compiles a dataset on bank credit for 33 advanced and emerging market economies from 1979Q1 to 2009Q4. The empirical results suggest that the incorporation of credit provides significant improvement in modeling and forecasting output growth, changes in inflation and long run interest rates, for countries with developed banking sector. Impulse response analysis provide strong evidence of the international spillover of US credit shocks to the UK, the Euro area, Japan and other industrialized economies, and the propagation to the real economy. |
| Keywords: | Business fluctuations and cycles; Credit and credit aggregates; Econometric and statistical methods; International financial markets |
| JEL: | C32 G21 E44 E32 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:12-36&r=opm |
| By: | Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti |
| Abstract: | To study the short-run and long-run implications on wage inequality, we introduce directed technical change into a Ricardian model of offshoring. A unique final good is produced by combining a skilled and an unskilled product, each produced from a continuum of intermediates (tasks). Some of these tasks can be transferred from a skill-abundant West to a skill-scarce East. Profit maximization determines both the extent of offshoring and technological progress. Offshoring induces skill-biased technical change because it increases the relative price of skill intensive products and induces technical change favoring unskilled workers because it expands the market size for technologies complementing unskilled labor. In the empirically more relevant case, starting from low levels, an increase in offshoring opportunities triggers a transition with falling real wages for unskilled workers in the West, skill-biased technical change and rising skill premia worldwide. However, when the extent of offshoring becomes sufficiently large, further increases in offshoring induce technical change now biased in favor of unskilled labor because offshoring closes the gap between unskilled wages in the West and the East, thus limiting the power of the price effect fueling skill-biased technical change. The unequalizing impact of offshoring is thus greatest at the beginning. Transitional dynamics reveal that offshoring and technical change are substitutes in the short run but complements in the long run. Finally, though offshoring improves the welfare of workers in the East, it may benefit or harm unskilled workers in the West depending on elasticities and the equilibrium growth rate. |
| JEL: | F43 O31 O33 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18595&r=opm |
| By: | Hubert Gabrisch; Karsten Staehr |
| Keywords: | European integration , policy coordination , unit labor costs , current account imbalances, economic crises |
| JEL: | E61 F36 F41 |
| Date: | 2012–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2012-5&r=opm |
| By: | Luis Felipe Céspedes; Andrés Velasco |
| Abstract: | Fluctuations in commodity prices are often associated with macroeconomic volatility. But not all nations are created equal in this regard. The macro response to commodity booms and busts depends both on the structural characteristics of the economy and on the policy framework that is in place. In this paper we investigate the macro response of a group of commodity-producing nations in episodes of large commodity prices shocks. First we provide a theoretical framework to analyze how shocks to commodity prices affect the domestic economy. For this we use a simple open-economy model with nominal rigidities and financial frictions. Then we provide empirical evidence (using commodity price boom and bust episodes) that commodity price shocks have a significant impact on output and investment dynamics. Economies with more flexible exchange rate regimes exhibit less pronounced responses of output during these episodes. We also provide evidence that the impact of those shocks on investment tends to be larger for economies with less developed financial markets. Moreover, we find that international reserve accumulation, more stable political systems, and less open capital accounts tend to reduce the real exchange rate appreciation (depreciation) in episodes of commodity price booms (busts). |
| JEL: | E52 E58 F31 F32 F36 F41 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18569&r=opm |
| By: | Jérôme Héricourt; Sandra Poncet |
| Abstract: | This paper studies how firm-level export performance is affected by RER volatility and investigates whether this effect depends on existing financial constraints. Our empirical analysis relies on export data for more than 100,000 Chinese exporters over the period 2000-2006. We confirm a trade-deterring effect of RER volatility. We find that firms tend to export less and fewer products to destinations with higher exchange rate volatility and that this effect is magnified for financially vulnerable firms. As expected, financial development does seem to dampen this negative impact, especially on the intensive margin of export. |
| Keywords: | Exchange rate volatility;financial development;exports |
| JEL: | F10 R12 L25 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2012-35&r=opm |