does exchange rate variability depress trade flows evidence from error correction models this paper examines the impact of exchange rate volatility on the trade flows of the g 7 countries in the context of a multivariate error correction model the error correction models do not show any sign of parameter instability the results indicate that the exchange rate volatility has a significant negative impact on the volume of exports in each of the g 7 countries assuming market participants are risk averse these results imply that exchange rate uncertainty causes them to reduce their activities change prices or shift sources of demand and supply in order to minimize their exposure to the effects of exchange rate volatility this in turn can change the distribution of output across many sectors in these countries it is quite possible that the surprisingly weak relationship between trade flows and exchange rate volatility reported in several previous studies are due to insufficient attention to the stochastic properties of the relevant time series copyright 1993 by mit press

irreversible investment with regime shifts under the real options approach to investment under uncertainty agents formulate optimal policies under the assumption that firms growth prospects do not vary over time this paper proposes and solves a model of investment decisions in which the growth rate and volatility of the decision variable shift between different states at random times a value maximizing investment policy is derived such that in each regime the firm s investment policy is optimal and recognizes the possibility of a regime shift under this policy investment is intermittent and increases with marginal q moreover investment typically is very small but in some states the capital stock jumps implications for marginal q and the user cost of capital are also examined

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

has the european monetary system led to more exports evidence from four european union countries abstract we attempt to investigate whether the exchange rate mechanism erm period has coincided with an increase in intra eu exports we conclude that this has not been the case but it is likely that the elimination of nominal exchange rate variability arising from a single currency will boost intra european union trade

tipping points and business as usual in a global commons abstract this paper analyzes a dynamic strategic model of resource extraction from a global commons countries derive benefits from both direct extraction and aggregate conservation of an open access resource each period a country s output depends both on its resource usage and on the global stock of the resource stored within the ecosystem leading examples are ocean fisheries habitat preservation forestry and land carbon biomass the production coefficients on these inputs vary across countries and evolve stochastically over time a business as usual bau equilibrium characterizes each country s resource usage in the absence of an effective international agreement under non concave resource dynamics depletion of the resource in a bau equilibrium may reach a tipping point below which the stock spirals downward toward a steady state of marginal sustainability under the assumptions of the model the tipping points emerge endogenously if the number of extractors exceeds some fixed finite bound the commons always tips regardless of the initial stock we find that countries will accelerate their rates of extraction the closer they are to reaching the low end steady state by contrast in the socially efficient plan the commons never tips if the initial stock is large

central bank transparency and cross border banking abstract we analyze the effect of central bank transparency on cross border bank activities based on a panel gravity model for cross border bank claims for 21 home and 47 destination countries from 1998 to 2010 we find strong empirical evidence that a rise in central bank transparency in the destination country on average increases cross border claims using interaction models we find that the positive effect of central bank transparency on cross border claims is only significant if the central bank is politically independent and operates in a stable economic environment central bank transparency and credibility are thus considered complements by banks investing abroad

the impact of monetary union on macroeconomic integration evidence from west africa data from 19 african nations is used to investigate the hypothesis that monetary union represented in this case by the cfa franc zone augments the extent of macroeconomic integration the paper covers two key dimensions of integration the volume of bilateral trade and the magnitude of cross country business cycle correlation restricting our attention to a part of the world in which for historical reasons monetary union membership is exogenous to economic characteristics we can test whether the large single currency effects claimed by a rose apply within a sample of less developed countries

tourism s taxing times value added tax in europe and denmark abstract in recent times the business council of the world tourism organisation has been concerned at the escalation in the number of tourism taxes and the rates at which tourism is taxed there is a justifiable suspicion that governments are looking at the burgeoning tourist industry not from the rational principles of taxation but simply as a new revenue source particularly as foreign tourists are not voters in the destination the tourism industry has to cope with specific taxes such as a departure tax and general taxation such as value added tax vat this article reviews the principles by which tourism should be taxed and focuses on the different rates of vat in a european context using denmark as a case example a simulation exercise is carried out to examine the hotel sector s claim that a more efficient and equitable economic solution would result from cutting vat

exchange rate variation commodity price variation and the implications for international trade abstract a commonly cited disadvantage of floating exchange rates is that a fluctuating exchange rate reduces international trade when firm owners are risk averse risk averse firm owners are concerned with the variation in the real domestic currency price of the good they export or import this price variation depends on exchange rate variation but also on a good s foreign currency price variation domestic price level variation and the covariation between these three variables the empirical results presented here show that for many commodities floating exchange rates did not cause a significant increase in overall real domestic currency price variation

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

effects of exchange rate variations on bilateral trade with a vehicle currency evidence from china and singapore abstract using a testable gravity type bilateral trade model derived from an underlying demand and supply model this paper explores the effects of exchange rate variations on bilateral trade in an exchange rate regime with a vehicle currency the introduction of the vehicle currency allows us to figure out whether variations in the trade volume due to the fluctuation of the bilateral exchange rate are primarily due to changes in demand or in supply or both more specifically in this theoretical framework the appreciation of one country s currency against the vehicle currency is expected to promote its imports but the effect of revaluation of the country s currency against the vehicle currency on its exports is ambiguous moreover high volatility of the exchange rate of one country s currency against the vehicle currency is also expected to depress its import volume from the empirical point of view the decomposition of the bilateral exchange rate of two currencies into the bilateral rates of these two currencies against the vehicle currency provides a new alternative to avoid the econometric problem of potential reverse causality in assessing the effects through compiling a novel monthly bilateral trade dataset between china and singapore over 21 years or 252 months we empirically test the predictions of our model which get robust support from the results

exchange rate effects on the volume and variability of trade flows abstract this paper investigates the effects of exchange rate uncertainty on the volume and variability of trade flows employing a signal extraction framework we show that the direction and magnitude of importers and exporters optimal trading activities depend upon the source of the uncertainty general microstructure shocks fundamental factors driving the exchange rate process or a noisy signal of policy innovations providing a rationale for the contradictory empirical evidence in the literature we also show that exchange rate uncertainty emanating from general microstructure shocks and the fundamental factors reduces the variability of trade flows while that related to a noisy signal of policy innovations increases variability

does real exchange rate volatility affect sectoral trade flows this article investigates empirically the effect of real exchange rate volatility on sectoral bilateral trade flows between the united states and its top 13 trading partners our investigation also considers those effects on trade flows that may arise through changes in income volatility and the interaction between income and exchange rate volatilities we provide evidence that i exchange rate volatility does not systematically affect sectoral trade flows ii income volatility has little impact on trade flows and iii the effect of the interaction term on trade flows is opposite that of exchange rate volatility dampening its impact on trade flows

dynamic resource management under the risk of regime shifts abstract this paper provides a framework through which a dynamic resource management problem with potential regime shifts can be analyzed both in a strategic environment and from a social planner s perspective based on a fairly general model a condition for a precautionary policy is discussed by applying the framework to a common property resource problem with a linear production technology we illustrate how the qualitative as well as quantitative nature of equilibrium is altered due to the possibility of regime shifts in particular when the risk is endogenously affected by the players behavior potential regime shifts can facilitate the precautionary management of resources as long as the resource stock is in good shape as the stock of resource becomes scarce however the precautionary effect vanishes and more aggressive resource exploitation emerges the impacts of irreversibility on the equilibrium behavior are highlighted it is also shown that there can exist a resource depletion trap in which a regime shift once it happens triggers a continuous decline of resource stock no matter which regime materializes in the subsequent periods

the effects of real exchange rate risk on international trade abstract by assuming real profit maximization and uncertain prices as well as exchange rates we conclude that it is uncertain percentage changes in the real exchange rate that are risky in international trade empirical estimation of fourteen bilateral trade flows among industrialized countries finds a significant negative effect on trade quantity from such risk in a number of these cases the expectation variable has a positive effect in a larger number of cases significant price effects from the expectation variable are fewer and from risk are negligible

impact of exchange rate uncertainty on commodity trade between us and sweden previous studies that investigated the effects of exchange rate uncertainty on the trade flows of sweden employed aggregate trade data either between sweden and the rest of the world or at bilateral level between sweden and her major trading partners in this article we disaggregate the trade data and employ the import and export data from 87 industries that trade between sweden and the us we find that exchange rate volatility has significant short run effects on the trade flows between the two countries in almost two third of the industries however the short run effects are translated into the long run effects in one third of the cases furthermore the real depreciation of krona against the dollar was found to have favourable effects on the overall trade balance between the two countries

optimal management with reversible regime shifts abstract in this paper we examine the management of a natural resource a fishery subject to regime shifting dynamics a regime shift is defined as an episode in which the dynamics of the resource can switch between two alternative regimes at random times specifically we study the impact of reversible regime switching both observed and unobserved on optimal harvesting policy the case in which the regime is not directly observed i e observational uncertainty is addressed by using the extended pomdp approach developed in fackler and pacifici 2014 we illustrate the performance of the model under different assumptions on the underlying stochastic growth variability the biological structure of the stock in different regimes and the resilience of the regimes when the regime is known optimal policies depend on the population level and which regime is currently active when the regime is unobserved on the other hand the optimal policy depends on the population level and a belief distribution about the current regime in general when the probability of regime change is fixed and hence is not affected by harvesting policy the optimal policy is of the constant escapement variety when the probability of switching regime is endogenous the optimal policy is no longer of the constant escapement type optimal policies when the regime is uncertain are approximately equal to a weighted average of the policies when the regime is certain with the weights equal to the beliefs in the associated regimes but there are differences

consumption pollution tradeoffs in an environment vulnerable to pollution related catastrophic collapse abstract this paper considers the consequences of an avoidable risk of irreversible environmental catastrophe for society s optimal long run consumption pollution tradeoffs the risk is assumed to be a nondecreasing function of pollution concentration which evolves as a dynamic environmental renewal process the main objective of the paper is to derive qualitative insights regarding the effects of such risk on optimal management

the effects of exchange rate volatility on agricultural trade i extend cho sheldon and mccorriston s 2002 analysis of the effect of exchange rate volatility on agricultural trade among the g 10 countries to a broad sample of developed and developing nations i replicate their original finding that exchange rate volatility has a large negative impact on agricultural trade between g 10 members after controlling for agricultural export subsidies which are correlated with exchange rate volatility i show that the original impact declines by half using the extended sample i find that the effect of exchange rate volatility is much larger for developing country exporters than for developed exporters copyright 2008 oxford university press

the ubiquity of room taxes abstract this article examines the case for the imposition of room taxes and attempts to explain their ubiquity the room tax is analysed using the main criteria for assessing taxes and is compared to property tax the extent of room tax imposition is surveyed and the possibilities of evasion are discussed

accounting for global warming risks resource management under event uncertainty abstract optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect the uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved taking atmospheric pollution level as the state variable it is found that uncertainty implies the existence of an equilibrium interval within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint the determination of the interval requires no knowledge of the optimal policy in contrast ignoring event occurrence risk implies a single equilibrium level attracting the optimal process from any initial level

tourism and economic development a survey this article surveys the literature on tourism and economic development identifying the contribution that tourism can make to development including foreign currency income and employment and the costs that it entails single equation and system of equations models for estimating tourism demand are provided indicating developing countries potential to benefit from increasing expenditure on tourism but their susceptibility to deterioration in price competitiveness the main sectors of tourism supply transportation tour operators travel agents and accommodation are examined and the importance of cross country integration between firms is highlighted the article argues that many of the problems associated with the use of environmental resources for tourism stem from market failure and it considers methods for increasing sustainably the returns from them

optimal management with potential regime shifts we analyze how the threat of a potential future regime shift affects optimal management we use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics and exogenous versus endogenous probabilities of regime shift prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock we show that all other cases yield unambiguous results in particular with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels

carbon prices for the next hundred years this paper examines the socially optimal pricing of carbon emissions over time when climate change impacts are unknown potentially high consequence events the carbon price tends to increase with income but learning about impacts or their absence decouples the carbon price from income growth the price should grow faster than the economy if the past warming is not substantial enough for learning the true long run social cost it grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so a quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years

measuring and analysing the effects of short term volatility in real exchange rates this paper examines short term volatility in the real effective exchange rates of industrial countries and its impact on their imports it yields three conclusions first volatility has not diminished as markets have gained experience with floating exchange rates the trend appears to be in the opposite direction for some countries second exposure to short term volatility has differed among countries japan and sweden have experienced much more than most other industrial countries third volatility appears to depress the volume of international trade this third finding is consistent with results reported by cushman and by akhtar and hilton and challenges earlier findings by hooper and kohlhagen

spatial renewable resource extraction under possible regime shift how will countries harvesting mobile natural resources react to the possibility of regime shift we address the non cooperative exploitation of a migratory renewable resource in the presence of possible regime shift that affects its movement motivated by the anticipated effects of climate change we model a regime shift that will alter the spatial movement patterns of the resource at some point in the future we develop a stochastic spatial bioeconomic model to address the effects of this class of regime shift on non cooperative harvest decisions made by decentralized owners such as countries exploiting a migratory fish or other natural resource stock we find that the threat of a future shift modies the standard golden rule and may induce more aggressive harvest everywhere irrespective of whether the owner will be advantaged or disadvantaged by the shift we also identify conditions under which the threat of regime shift induces owners to reduce harvest rates in advance of the shift our analysis suggests that different property rights structures single ownership vs common property or heterogeneous growth can give rise to previously unexplored incentives and can even reverse conventional wisdom about how countries will react to the prospect of future environmental change

bilateral trade flows the linder hypothesis and exchange risk bilateral trade flows are used to examine the linder hypothesis and the effect of exchange rate variability in a gra vity type trade model derived from an underlying demand and supply mo del a behavioral model is used to justify examining these issues joi ntly the model performs well empirically using a sample of seventeen countries for the period 1974 82 the authors find overwhelming supp ort for the linder hypothesis and this version of the gravity model moreover they find strong support for the hypothesis that increased exchange rate variability affects bilateral trade flows copyright 1987 by mit press

inequality nonhomothetic preferences and trade a gravity approach we construct the first direct classification of goods as luxuries or necessities that is compatible with international trade data we then use it to test an idea that has not been tested directly in the literature countries income distributions are important determinants of their import demand and in particular of the difference in their import demands of luxuries versus necessities we interpret this result with the aid of a model in which preferences are nonhomothetic thus relaxing a long held and standard but empirically dubious assumption in the theory of international trade our model is strongly borne out by the results imports of luxuries increase with the importing country s inequality and imports of necessities decrease with it our calculations imply that if income distribution in the united states became as equal as in canada the united states would import about 9 13 fewer luxury goods and 13 19 more necessities

exchange rate volatility and exports a firm level analysis the relationship between real exports and exchange rate volatility is investigated using panel data analysis at the firm level results indicate that there is no negative or positive relationship between volatility and real exports in addition firm size and level of international activity do not influence the size and significance of the volatility effect on exports however there is some evidence that firms use import revenue to lower their exchange rate exposure

international financial volatility and commodity exports evidence from the thai agricultural sector using 1981 2006 data from the bank of thailand i estimate the effect of four measures of real exchange rate volatility on thai exports of five key agricultural commodities controlling for both the level of the real exchange rate and foreign incomes estimates of the effect of volatility on export volume are generally negative and often significant lending support to a range of theoretical models that predict such an effect no such relationship exists between lagged values of exchange rate volatility and agricultural production the range of results obtained using various measures of volatility suggests caution in comparing studies using different measures copyright 2010 oxford university press

country bashing tariffs do bilateral trade deficits matter abstract this paper investigates the impact of restricting bilateral trade imbalances in a three country three good model bilateral trade balances matter because in the nash equilibrium each country will impose tariffs on countries with whom they have bilateral deficits or promote trade with countries with whom they have bilateral surpluses all countries lose from a nash country bashing war each country loses from the unilateral elimination of its bilateral imbalances but a country can gain from a bilateral agreement with its deficit partner provided that country has a surplus with a country devoted to free trade

exchange rate variability and the export demand for malaysia s semiconductors an empirical study this article examines the effects of exchange rate variability on export demand for semiconductors which is the largest sub sector of electronics industry in malaysia as reported by malaysian industrial development authority mida 2004 the empirical results which are estimated based on the johansen s multivariate cointegration tests and error correction model suggest that there is a unique long run relationship among quantities of export relative price real foreign income and real exchange rate variability the major finding of this article is that the variability of real exchange rate has some effect on semiconductor exports in both the long run and the short run in the light of rapid advances in technology in the global markets for electronics products the findings are useful to policy makers for the design and target of appropriate exchange rate and industrial policies to enhance the export competitiveness of semiconductor industry

existence and properties of equilibria for a dynamic game on productive assets abstract we consider a model in which two agents share access to the same stock of a productive asset and study the implications of non cooperative consumption behavior over time under standard assumptions on the production function we construct infinitely many nash equilibria all of which consist of stationary markovian strategies these equilibria result in overconsumption so that the uniquely determined long run asset stock is too low as compared to the cooperative solution however in the limit as the discount rate becomes sufficiently small the stead states generated by the markovian nash equilibria converge to the efficient steady state journal of economic literatureclassification numbers c73 o41 q22

regime shifts and uncertainty in pollution control we develop a simple model of managing a system subject to pollution damage such as climate change under the risk of an abrupt and random jump in the damage function the model allows the full dynamic characterization of the optimal emission policies under uncertainty the results imply precautionary behavior in contrast with the ambiguous outcomes reported in the literature for models of catastrophic occurrences the framework is used to analyze the adaptation vs mitigation dilemma and provides a simple criterion to determine when adaptation activities should be undertaken

the effects of exchange rate variability on international trade a meta regression analysis the trade effects of exchange rate variability have been an issue in international economics for the past 30 years the contribution of this article is to apply meta regression analysis mra to the empirical literature on average exchange rate variability exerts a negative effect on international trade yet mra confirms the view that this result is highly conditional by identifying factors that help to explain why estimated trade effects vary from significantly negative to significantly positive mra evidence on the pronounced heterogeneity of the empirical findings may be instructive for policy first by establishing that average trade effects are not sufficiently robust to generalize across countries and second by suggesting the importance of hedging opportunities hence of financial development for trade promotion for the practice of mra we make a case for checking the robustness of results with respect to estimation technique model specification and sample

a political economic model of u s bilateral trade a bstract interrelationships between economics and politics have long been recognized by scholars in the field of international relations this paper attempts to identify and quantify the factors aflecting bilateral trade flows between the united states and other countries by developing a gravity type model the model includes economic and political variables and is tested using data for sixty six u s trading partners results indicate that pure economic variables which reflect market forces are not the only factors affecting u s bilateral trade semi cconomic and international political factors are also important

international capital flows and agricultural exports interest in the relationship between international capital flows and exports revived recently following the international debt repayment problems of several developing countries and the decline in u s agricultural exports since 1980 this paper will consider the recent export decline as well as the more general relationship between lending and agricultural exports although particular agricultural exports have been important throughout its history the united states did not become a persistent agricultural exporter until 1960 council of economic advisers p 342 agricultural exports and the agricultural trade balance increased sharply in 1973 and again in 1979 80 see table 1 in each of these cases the price of oil increased and the dollar depreciated in real terms subsequently exports decreased constant 1967 dollars from 16 7 billion in 1980 to 9 0 billion in 1985 and the real agricultural trade balance declined from 9 7 billion to 2 8 billion during the same period the 1985 decline has returned exports to the pre1973 level

fixed exchange rates and trade abstract a classic argument for a fixed exchange rate is its promotion of trade empirical support for this however is mixed while one branch of research consistently shows a small negative effect of exchange rate volatility on trade another more recent branch presents evidence of a large positive impact of currency unions on trade this paper helps resolve this disconnect our results which use a new data based classification of fixed exchange rate regimes show a large significant effect of a fixed exchange rate on bilateral trade between a base country and a country that pegs to it these results suggest an economically relevant role for exchange rate regimes in trade determination since a significant amount of world trade is conducted between countries with fixed exchange rates

robust non parametric measures of exchange rate variability changes in exchange rates are well known to possess non gaussian distributions yet in testing for differences in exchange rate volatility few researches have examined measures that do not assume gaussian data this paper develops a robust non parametric measure for comparing exchange rate variability across time the measures are applied to monthly exchange rate data to test for differences in exchange rate variability across different monetary policy regimes the comparison show inconsistencies between conclusions based on the classical f test and the robust non parametric equivalent using the robust test for changes in exchange rate variability we do not conclude that variability has increased over time increases in variability do occur but usually only in specific percentiles of the data

coalition formation in fisheries with potential regime shift a system can undergo rapid regime shift in which the growth of natural resources suddenly and permanently declines we examine how the threat of such a shift alters the strategic management of a common pool renewable resource we consider exogenous and endogenous threats and examine their effects on both incentives to join a coalition and harvest decisions we find that an exogenous threat of reduced resource growth may cause the coalition to grow in size and perhaps of most interest we identify conditions under which members of the stable coalition reduce harvest while non members increase harvest in response to the threat in contrast an exogenous threat of total stock collapse may destabilize coalitions resulting in higher harvest from former members but reduced harvest by non members when the threat of either type of shift is endogenous the threat of regime shift can induce stable coalitions with more than two members in particular we identify cases in which the first best full cooperation is sustained as an equilibrium outcome finally we find that the relation between the magnitude of the shift and the size of stable coalitions may be negative

gravity models a reformulation and an application to discriminatory trade arrangements gravity models are used to estimate trade flows from 162 countries into 11 major importing countries for 1976 counting the ec as one the main theories underlying gravity models are reviewed and a new gravity model is derived from a linear expenditure system a major innovation of this model is that both tariffs and dummy variables for discriminatory arrangements are incorporated price variables are also explicitly included in the model the tariff and the dummy variables are found to be statistically significant and this indicates that previous gravity model studies which used dummies to estimate the trade benefits of preferential tariffs may not have accurately estimated the effects of the preferences the price variables generally are also found to be statistically significant which casts doubt on the homogeneous goods assumption underlying the purchasing power parity hypothesis some significant differences in the estimates were found when separate equations were regressed for the eec and the us

exchange rate variability and the flow of international trade abstract this study uses a garch generalized autoregressive conditional heteroskedasticity model to test if real exchange rate volatility has an adverse effect on the value of u s imports from canada we find that exchange rate uncertainty has a negative and statistically significant affect on trade flows