explaining the border effect the role of exchange rate variability shipping costs and geography this paper exploits a three dimensional panel data set of prices on 27 traded goods over 88 quarters across 96 cities in the us and japan we show that a simple average of good level real exchange rates tracks the nominal exchange rate well suggesting strong evidence of sticky prices focusing on dispersion in prices between city pairs we find that crossing the us japan border is equivalent to adding as much as 43 000 trillion miles to the cross country volatility of relative prices we turn next to economic explanations for this so called border effect and to its dynamics distance unit shipping costs and exchange rate variability collectively explain a substantial portion of the observed international market segmentation relative wage variability on the other hand has little independent impact on segmentation 2001 elsevier science b v all rights reserved

export market performance of oecd countries an empirical examination of the role of cost competitiveness we investigate the relationship between export market shares and relative unit labour costs using a long panel of 12 manufacturing industries across 14 oecd countries we ask how sensitive are export market shares to changes in relative costs and what determines this sensitivity both costs and embodied technology are important but neither can fully explain changing export positions we explore whether residual country specific trends might be linked to deep structural features of economies sensitivity to labour costs is lower in high tech industries and core erm countries industry elasticities have increased especially in industries subject to increasing product market competition

distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

trade costs and deviations from the law of one price the link between relative prices across countries and trade costs requires a theoretical foundation that is absent in the literature to date empirical tests on the law of one price are based on an arbitrage equation which is of very limited relevance in understanding this link the application of a new set of arbitrage equations to the tin trade market yields results that are consistent with our theoretical expectations we find evidence in favor of the law of one price between the united states and japan however evidence of price discrimination is also found for the los angeles market

international portfolio flows and exchange rate volatility in emerging asian markets abstract this paper investigates the effects of equity and bond portfolio inflows on exchange rate volatility using monthly bilateral data for the us vis a vis seven asian developing and emerging countries india indonesia pakistan the philippines south korea taiwan and thailand over the period 1993 01 2015 11 garch models and markov switching specifications with time varying transition probabilities are estimated in addition to a benchmark linear model the evidence suggests that high low exchange rate volatility is associated with equity bond inflows from the asian countries toward the us in all cases with the exception of the philippines therefore capital controls could be an effective tool to stabilise the foreign exchange market in countries where flows affect exchange rate volatility

the impact of technology and structural change on export performance in nine developing countries summary this paper focuses on nine large developing countries structural decomposition analysis shows that they tend to concentrate innovative activities in industries stagnating at the world level international trends partly offset national improvements in patent shares the same occurs for world export shares although countries display greater adaptation to world demand econometric analysis suggests that technological activity is related to export gains in high technology sectors if a country expands in industries with increasing technological opportunities in medium technology sectors if it moves away from low opportunity sectors in low technology sectors if it is initially specialized in growing sectors in high tech and low tech sectors export performance is also affected by the growth of technical capabilities foreign direct investments productivity and the initial level of technical skills and in medium tech by the growth rates of foreign direct investments

effects of capital controls on foreign exchange liquidity abstract this paper investigates from a theoretical and empirical perspective the effects of capital controls on cost based measures of foreign exchange fx market liquidity first we propose a market microstructure model of the exchange rate where capital controls reduce the trades of constrained dealers the effect is a tightening of the effective spread which increases market liquidity then we propose a new measure of capital account restrictiveness that in contrast to other traditional measures can account for intensive changes in capital controls policies using this measure in a panel of emerging market economies we provide empirical evidence showing that capital controls can reduce the implicit cost component of fx market liquidity

purchasing power parity yet again evidence from spatially separated commodity markets abstract this paper examines the empirical validity of the law of one price by exploiting the non stationarity of prices set in us dollars of varieties of wheat that are traded simultaneously in the usa rotterdam and japan we demonstrate the crucial role of transport costs in achieving cointegration long run ppp although systematic short run deviations from ppp occur we show that this does not imply profitable arbitrage opportunities jel c5 f3 g1

exchange rate uncertainty and international portfolio flows a multivariate garch in mean approach abstract this paper examines the impact of exchange rate uncertainty on different components of net portfolio flows namely net equity and net bond flows as well as their dynamic linkages specifically a bivariate var garch bekk in mean model is estimated using bilateral monthly data for the us vis a vis australia canada the euro area japan sweden and the uk over the period 1988 01 2011 12 the results indicate that the effect of exchange rate uncertainty on net equity flows is negative in the euro area the uk and sweden and positive in australia the impact on net bond flows is also negative in all countries except canada where it is positive under the assumption of risk aversion the findings suggest that exchange rate uncertainty induces a home bias and causes investors to reduce their financial activities to maximise returns and minimise exposure to uncertainty this effect being stronger in the uk the euro area and sweden compared to canada australia and japan overall the results indicate that exchange rate or credit controls on these flows can be used as a policy tool in countries with strong uncertainty effects to pursue economic and financial stability

price discrimination and quality improvement this paper models quality improvements when multiple quality levels can sell owing to differences in consumers valuations of quality improvements firms can collude to price discriminate so that consumers with high valuations pay a price premium while others receive a quality level below the highest available imposing minimum quality standards or price ceilings can ensure that only the highest quality level of each product is sold such intervention reduces the quality adjusted price paid by consumers but also reduces the incentives for firms to innovate when enough consumers have high valuations such intervention must be welfare reducing owing to reduced innovation jel classification o31 l16 discrimination par les prix et amelioration de la qualite ce memoire presente un modele d amelioration de la qualite quand on peut vendre des produits a divers niveaux de qualitea cause des differences dans les evaluations d amelioration de qualite par les consommateurs les entreprises peuvent entrer en collusion pour faire de la discrimination par les prix de maniere a ce que les consommateurs qui apprecient davantage la qualite paient une prime pendant que les autres consommateurs recoivent une qualite au dessous de ce qui est la meilleure qualite disponible si on impose des normes de qualite minimale ou des plafonds aux prix on peut s assurer que seuls les produits de la plus haute qualite seront vendus de telles interventions reduisent le niveau de prix ajuste pour la qualite paye par les consommateurs mais reduisent aussi les incitations des entreprises a innover quand un nombre suffisant de consommateurs apprecient beaucoup la qualite de telles interventions peuvent reduire le niveau de bien etre a cause des innovations moins importantes

home bias in global bond and equity markets the role of real exchange rate volatility abstract this paper focuses on the role of real exchange rate volatility as a driver of portfolio home bias and in particular as an explanation for differences in home bias across financial assets we present a markowitz type portfolio selection model in which real exchange rate volatility induces a bias towards domestic financial assets as well as a stronger home bias for assets with low local currency return volatility we find empirical support in favour of this hypothesis for a broad set of industrialized and emerging market countries not only is real exchange rate volatility an important factor behind bilateral portfolio home bias but we find that a reduction of monthly real exchange rate volatility from its sample mean to zero reduces bond home bias by up to 60 percentage points while it reduces equity home bias by only 20 percentage points

currency crises sunspots and markov switching regimes abstract this paper investigates the theoretical properties of a class of escape clause models of currency crises as well as their applicability to empirical work we show that under some conditions these models give rise to an arbitrarily large number of equilibria as well as cyclic or chaotic dynamics for the devaluation expectations we then propose an econometric technique based on the markov switching regimes framework by which these models can be brought to the data we illustrate this empirical approach by studying the experience of the french franc between 1987 and 1993 and find that the model performs significantly better when it allows the devaluation expectations to be influenced by sunspots

impact of the us ec price war on major wheat exporters shares of the chinese market abstract china is both the world s largest producer and consumer of wheat in an attempt to gain a larger slice of the important chinese market both the european community and the united states have offered china subsidised wheat in addition other exporters have offered attractive credit arrangements to china the objective of this paper is to measure the overall impact of these policies on each exporter s share of the chinese market to that end an improved version of the constant market shares model is applied to data on chinese wheat imports in the 1980 s the results indicate that the united states has been outperforming the other exporters since subsidised us wheat sales were authorised for china in 1987 the implications of the analysis for the smaller exporters and international wheat trade are discussed

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

commodity currencies and equity flows abstract this paper analyzes the relationship among the prices of natural resources returns on equity and nominal exchange rates of the developed countries where primary commodities are an important share of exports australia canada and new zealand it is found that the portfolio rebalancing motive of hau and rey hau h rey h 2006 exchange rates equity prices and capital flows review of financial studies 19 1 273 317 is weaker for these countries one possible explanation of this finding is that commodity prices due to their flexibility play a special role in the transmission of shocks by linking equity markets across countries and reducing the need for portfolio rebalancing

specialization across varieties and north south competition analyzing a new database that makes it possible to disaggregate trade flows across many countries according to unit values we show that international specialization in terms of quality within industries and product categories plays an important role in the dynamics of north south competition the different specialization of countries at different levels of development within products and across varieties is mirrored in the recent shifts in world market shares which are very different across quality segments the south is not gaining market share in high value portions of trade pattern in this respect europe s specialization pattern appears to be different from that of the us and japan and may allow it to better resist the competitive pressure of the south lionel fontagne guillaume gaulier and soledad zignago

the law of one price in international commodity markets a reformulation and some formal tests abstract we report formal tests of whether the law of one price lop holds in the long and in the short run for commodities traded in orgnized markets we formalize the distinction between short and long run by introducing lagged price adjustments also we introduce expectations explicitly tests support the long run lop but they reject the short rn lop the long run lop holds better for future prices than for spot prices on average 90 per cent of the deviation from lop is eliminated within 10 weeks but this ranges from 1 to 120 weeks

intellectual property rights and foreign direct investment abstract this paper develops a product cycle model with endogenous innovation imitation and foreign direct investment fdi we use this model to determine how stronger intellectual property rights ipr protection in the south affects innovation imitation and fdi we find that stronger ipr protection keeps multinationals safer from imitation but no more so than northern firms instead the increased difficulty of imitation generates resource wasting and imitation disincentive effects that reduce both fdi and innovation the greater resources absorbed in imitation crowd out fdi reduced fdi then transmits resource scarcity in the south back to the north and consequently contracts innovation

spot and futures prices and the law of one price the law of one price lop is tested for narrowly defined commodities traded in futures markets in different countries during the period 1973 80 although the lop holds as an average tendency for most of the commodities there are instances of large riskless arbitrage returns before transactions costs deviations from the lop tend to be commodity specific rather than due to a common external factor and they tend to be smaller the longer the maturity of the futures contract in this paper we examine how well the law of one price lop holds for commodities traded internationally the answer to this question is important for two reasons the first is that in most modern theories of exchange rates price arbitrage for at least some goods is a necessary condition to determine the level of exchange rates but recent empirical research on the behavior of various price indices casts doubt on the empirical validity of the lop across countries for even the most disaggregated indices if it is not possible to identify any commodities for which the lop works satisfactorily then models incorporating the lop will not provide an adequate description of exchange rates the second reason for studying individual commodities is to gain information on the efficiency and the degree of integration of international commodity markets in efficient markets international commodity arbitrage implies that for a standard commodity prices in two markets expressed in a common currency will not differ but for transport costs

real effective exchange rate and the constant elasticity of substitution assumption abstract the real effective exchange rate reer is an aggregation of several bilateral real exchange rates assuming constant elasticity of substitution ces between goods from different countries we investigate the validity of the ces assumption by estimating manufacturing export equations for 56 countries over 26 years under the ces assumption splitting the reer into two components should not increase the fit in an export equation and the coefficients on the two reers should be equal we reject both these implications and find that the export equations with two reers vs oecd and vs nonoecd countries perform better than the traditional ones

us export competitiveness 1962 77 1984 us export competitiveness 1962 77 applied economics vol 16 no 3 pp 461 473

realizing fair outcomes in minimum cost spanning tree problems through non cooperative mechanisms abstract in the context of minimum cost spanning tree problems we present a bargaining mechanism for connecting all agents to the source and dividing the cost among them the basic idea is very simple we ask each agent the part of the cost he is willing to pay for an arc to be constructed we prove that there exists a unique payoff allocation associated with the subgame perfect nash equilibria of this bargaining mechanism moreover this payoff allocation coincides with the rule defined in bergantinos and vidal puga bergantinos g vidal puga j j 2007a a fair rule in minimum cost spanning tree problems journal of economic theory 137 326 352

trade in nominal assets and net international capital flows abstract nominal assets play a major role in international financial markets while trade in indexed bonds is limited as a result agents are exposed to both price and exchange rate uncertainty nonetheless previous research on net capital flows has assumed the presence of a risk free vehicle to intertemporal asset trade in this paper we develop a general equilibrium intertemporal model with trade limited to nominal bonds and equity we find that exposure to nominal risk dampens net capital flows thus making economies effectively more closed

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

quality competition and pricing to market a unified framework for the analysis of bilateral unit values author affiliation michael j ferrantino michael ferrantino usitc govrobert m feinberg feinber american edulauren deason l deason cgiar org acknowledgment this article represents solely the views of the authors and does not represent the views of the u s international trade commission or any of its commissioners we thank john pepper and two anonymous referees for helpful comments on an earlier draft the timely assistance of ronald jansen and his team at the united nations statistical division with various puzzles involving the comtrade data is gratefully acknowledged as is the thorough editorial assistance of peg hausman 1 introductionthe abundance of data on unit values in trade has generated a large number of explorations into the stylized facts generating them unit values defined as value of imports divided by import quantities are traditionally used as the best proxy for price data in international trade at relatively disaggregated trade categories the present article presents a unified framework for identifying systematic variation in unit values using multilateral data at the harmonized system hs 6 level this compares to research on unit values that is motivated either by supply side considerations relating to product quality associating higher unit values with exporters per capita income or demand side considerations of pricing to market associating higher unit values with importers per capita income the former work includes schott 2008 focusing on china and fontagne gaulier and zignago 2008 which use a unit value classification to motivate an extended gravity model of trade flows the latter is exemplified by alessandria and kaboski 2007 and co 2007 1most of this work except for fontagne gaulier and zignago et al tends to focus on a single exporter or importer rather than on the multilateral trade data we employ or on a particular motivation for variation in unit values in trade while fontagne gaulier and zignago do employ multilateral data in examining importer and exporter income effects on unit value they do not allow these effects to vary by product and focus mainly on results generated by restricting the set of products considered to include only manufactured goods our findings are largely consistent with those of fontagne gaulier and zignago however our analysis at the product level for a more diverse set of goods allows us to explore how importer and exporter income effects vary across products we find that both exporter income effects and importer income effects are important in determining trade prices but that exporter income effects are more prevalent and tend to be larger in magnitude the variation in the size of these effects across industries is indicative of the relative degree of product homogeneity table 1 illustrates the type of variation one finds in the unit value data for a particular hs 6 subheading watches excluding wristwatches with cases of or clad with precious metal electrically operated 2 the example which reflects the largest trade flows for this subheading in quantity terms 3 illustrates several features which are frequently observed for a wide variety of products first the range in unit values is very broad amounting to three or four orders of magnitude exports from switzerland to great britain have a unit value of 1001 68 while exports from china to japan sell for 0 56 apiece these are highly unlikely to represent the same product second higher income countries tend to sell a higher priced product in this sample swiss watches are always higher priced than chinese watches third higher income countries tend to pay more for products in this category compare imports of great britain and the netherlands versus imports of bulgaria south africa and mexico fourth there are observations that are exceptions to both the second and third rules

the law of one price in scandinavian duty free stores many empirical studies have rejected the law of one price that prices of a good differ across locations has been explained by differences in product attributes and costs of local inputs transport costs trade barriers and that buyers have imperfect information about prices in different locations see penelopi k goldberg and michael m knetter 1997 for a survey we examine the law of one price in situations where none of the mentioned reasons for its failure can be invoked it has also been suggested that deviations from the law of one price are a consequence of rigid nominal prices and that different countries typically have different currencies we explore whether this can contribute to our understanding of deviations from the law of one price our data are taken from three scandinavian duty free outlets where each product at the same location has price tags in at least two currencies hence a consumer has the option to choose between several prices for the same identical good in such a setting there is a strong prior that the law of one price lop hereafter holds well however the potential for arbitrage will arise because nominal prices are not continuously adjusted while exchange rates fluctuate daily based on standard tests we reject lop at all duty free outlets given that lop does not hold here it is less surprising that many previous studies have found that prices of similar products at different locations differ significantly nevertheless the main conclusion of the paper is that in this natural experiment lop remains a useful guide to the behavior of relative prices as deviations become large nominal prices are adjusted to reduce the deviations from lop thereby limiting arbitrage opportunities the patterns at the duty free outlets suggest that there is a band of inaction so that small deviations from lop may persist for almost a decade in one case but that large deviations quickly lead firms to adjust relative prices the findings are consistent with costly arbitrage and fixed costs of adjusting nominal prices

export quality and the dynamics of north south competition this paper introduces and applies a new methodology to deal with competition among exporters of vertically differentiated products the novel methodology is applied to imports of manufactured goods from japan at the most detailed level of classification it is shown that the north lost market share in direct competition with the south in all of the three product segments low medium and high and in every sub period from 1988 to 2010 except in the high segment in the 1988 91 sub period most of the north s direct loss to the south took place in the low and medium segments china accounts for most of the south s direct gains in these two segments while the rest of the developing countries of asia accounts for most of these gains in the high segment

cost monotonicity consistency and minimum cost spanning tree games abstract we propose a new cost allocation rule for minimum cost spanning tree games the new rule is a core selection and also satisfies cost monotonicity we also give characterisation theorems for the new rule as well as the much studied bird allocation we show that the principal difference between these two rules is in terms of their consistency properties

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

on the persistence of leadership or leapfrogging in international trade when two countries starting from different quality levels reflecting different conditions on domestic market demands open to trade two possible equilibria arise in the first the quality leader maintains its position in the second leapfrogging occurs however the latter is possible only if the initial quality gap is not too wide further when the risk dominance criterion is used only the former equilibrium is selected these results suggest that initial conditions such as domestic market size or home demand preferences are important factors in determining relative competitiveness of firms in international markets

the law of one price revisited new evidence on the behavior of international prices i introduction the law of one price asserts that prices of identical goods should be equalized internationally when expressed in a common currency and adjusted for any contract differences transportation costs and trade distortions the intuition is that international arbitrage should work to eliminate any persistent price discrepancies due solely to differences in the country of origin or sale of goods thus stated the law of one price is frequently assumed to hold in theoretical and empirical models of international trade yet based on evidence from the 1950s 1960s and early 1970s the proposition does not appear to characterize the actual price behavior of many traded goods the evidence further indicates that deviations from absolute price equalization are often both large and protracted even during periods of comparative exchange rate stability 1 the relative version of the law of one price posits that rates of change in prices will be equalized meaning that exchange rate adjusted inflation rates should be the same for similar traded goods empirical support for this alternative has also been lacking 2 as isard 1977b indicates this evidence calls into question any appeal to microfoundations as a basis for macroeconomic price convergence in the form of purchasing power parity ppp it also casts doubt on the role of price linkages in both international market integration and the transmission of economic disturbances across national borders the prevailing view on international price equalization derives from evidence and analyses which are dated and need not apply to current economic conditions most published studies involve data from fixed rate periods very early episodes of floating rates or the first years of the present flexible rate system an analysis based on more contemporary data is warranted in view of the substantial exchange rate movements and the perceived increase in international integration that have occurred since these earlier studies 3 in addition a fresh look at the evidence can make use of both the longer time series data and new time series techniques that are now available accordingly this study updates the microeconomic evidence on international price equalization while investigating the existence and nature of the long run relationship between traded goods prices it analyzes the behavior of u s export prices relative to japanese and german dollar export prices for carefully matched identically weighted categories of manufactured goods over the current floating rate period stationarity and cointegration tests are used to assess the time series properties of these relative export prices and to determine the extent to which the common currency prices of similar exports are related internationally in the long run while these methods have been used in analyses of purchasing power parity they have not been extended to studies of traded goods prices at the microeconomic level ii data description this study is based on a set of quarterly relative dollar export price indexes constructed by the bureau of labor statistics bls the data represent ratios of u s export prices to german or japanese export prices expressed in dollars for highly comparable product groups conceptually the series measure the average price of a particular set of u s exports to all foreign markets relative to a dollar price index for a similar set of exports from germany or japan the indexes are weighted averages of transactions contract prices of individual exports reported on an f o b free on board or f a s free along side ship basis for the final month of each quarter and adjusted for quality changes the categories are fairly disaggregated e g valves trucks over 2000cc so that the comparison is between relatively narrow product categories two additional features in the bls s design of the series ensure a high degree of comparability between the pairs of export categories

a contribution to a multidimensional analysis of trade competition international trade grew substantially throughout the last decades and international relations became more important for the economic performance of the countries simultaneously new poles emerged in the international arena leading to growing competition for higher market shares therefore trade competition is a critical dimension of analysis for applied international trade studies we propose a conceptual framework for measuring this phenomenon by combining some critical previous contributions to build a multidimensional and more comprehensive concept which defines trade competition as a function of the degree of both structural similarity and total exports overlap moreover structural similarity should take into account three elements sectoral shares similarity inter sectoral similarity evaluating how different the distinct sectors are and intra sectoral similarity proximity in terms of quality ranges exported several measures are proposed to empirically capture the concept suggested finally we present an example including the exports of the three largest european economies to 122 destination markets in order to illustrate the application of the concept and the measures suggested this abstract was borrowed from another version of this item

the trade reducing effects of market power in international shipping abstract developing countries pay substantially higher transportation costs than developed nations which leads to less trade and perhaps lower incomes this paper investigates price discrimination in the shipping industry and the role it plays in determining transportation costs in the presence of market power shipping prices depend on the demand characteristics of goods being traded we show theoretically and estimate empirically that ocean cargo carriers charge higher prices when transporting goods with higher product prices lower import demand elasticities and higher tariffs and when facing fewer competitors on a trade route these characteristics explain more variation in shipping prices than do conventional proxies such as distance and significantly contribute to the higher shipping prices facing the developing world a simple back of the envelope calculation suggests that eliminating market power in shipping would boost trade volumes by 5 9 for the us to 15 2 for latin america our findings are also important for evaluating the impact of tariff liberalization cargo carriers decrease shipping prices by 1 2 for every 1 reduction in tariffs

coffee market liberalisation and the implications for producers in brazil guatemala and india the standard approach to modelling the relationship between world and producer prices of coffee does not incorporate the effects of changing government policies and market structures these changes have led to large structural breaks in the relationship between the prices implying the standard estimates are biased we model coffee prices in brazil guatemala and india allowing for the structural breaks and show that the liberalisation of coffee markets has benefited producers substantially both in terms of a higher share of the world price of coffee and higher real prices this suggests that calls to re regulate coffee markets may be misplaced

analyzing the impacts of foreign exchange and oil price on biofuel commodity futures abstract this paper employs an arji trend model that combines the autoregressive jump intensity arji and component models to analyze the effects of the u s dollar index and oil prices on the dynamic properties of biofuel related commodity futures the results show that the arji trend model not only provides a better fit for the data on the volatility dynamics of corn soybean and wheat futures but also performs better in terms of out of sample forecasting the u s dollar index and oil prices both generate significant impacts on the returns of the futures since the coexistence of permanent component transitory component and time varying jumps are observed in those futures the arji trend model is beneficial for acquiring a better understanding of the differential attributes among corn soybean and wheat futures

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

the great retrenchment international capital flows during the global financial crisis the current crisis saw an unprecedented collapse in international capital flows after years of rising financial globalization we identify the stylized facts and main drivers of this development the retrenchment in international capital flows is a highly heterogeneous phenomenon first across time being especially dramatic in the wake of the lehman brothers failure secondly across types of flows with banking flows being the hardest hit due to their sensitivity of risk perception and thirdly across regions with emerging economies experiencing a shorter lived retrenchment than developed economies our econometric analysis shows that the magnitude of the retrenchment in capital flows across countries is linked to the extent of international financial integration its specific nature with countries relying on bank flows being the hardest hit as well as domestic macroeconomic conditions and their connection to world trade flows gian maria milesi ferretti and cedric tille

axiomatization of the shapley value on minimum cost spanning tree games abstract this paper axiomatizes the shapley value on minimum cost spanning tree games by using axioms which are different from those used in network games journal of economic literature classification numbers c71 a14

has the european community gsp increased ldc exports hypothesized differences in mean changes in shares of european community ec import markets over the period 1976 84 are tested for each of 36 less developed countries means are calculated for cases in which mfn tariffs are re established and for cases in which duty free treatment is restored under the ec generalized system of preferences they are compared with means for cases in which tariffs remained constant we attempt to control for both product specific and cyclical influences on imports in contrast to some previous results our findings suggest that denial restoration of preferential treatment i e a tariff increase decrease has its expected negative positive effect

revisiting the interest rate exchange rate nexus a markov switching approach abstract in this paper the interest rate exchange rate nexus and the effectiveness of an interest rate defense are investigated empirically i present a reduced form evidence which characterizes the empirical relationship between interest rates and exchange rates i use a markov switching specification of the nominal exchange rate with time varying transition probabilities empirical evidence from six developing countries indonesia south korea the philippines thailand mexico and turkey indicates that raising nominal interest rates leads to a higher probability of switching to a crisis regime thus the empirical results presented here may support the view that a high interest rate policy is unable to defend the exchange rate unlike other studies which consider linear models only my findings are robust and consistent over different countries and crisis episodes asian 1997 crises mexico 1994 crisis and turkey 1994 2001 crises in order to explain the empirical findings i construct a simple theoretical model by incorporating an interest rate rule in the model proposed by jeanne and rose 2002 jeanne o rose a k 2002 noise trading and exchange rate regimes quarterly journal of economics 117 2 537 569 the model has multiple equilibria and under plausible conditions higher exchange rate volatility is associated with higher interest rates

the product space revisited china s trade profile the concept of product space has encountered broad interest within the development community as an analytical tool against which to assess countries potential to diversify their production and export structures it has received far less attention in the economics literature and its assumptions and building blocks have not been put under scrutiny this paper assesses whether exclusive reliance on export data in product space analysis may limit its value as a tool assessing country capabilities reliance on net trade flows to account for horizontal intra industry trade and on unit values to capture within product differentiation changes the features of the product space based on a highly detailed data set of both trade value and volume and spanning over 144 countries the amended product space put forth in this paper shows that china has indeed expanded its trade profile to now occupy also product areas that are typically associated with higher income countries however china s remarkable success in expanding horizontally within the product space is strongly qualified by the introduction of the vertical dimension which shows the country to be occupying mostly the low unit value segment of product categories more akin to the typical trade profile of a developing country

a model of spatial arbitrage with transport capacity constraints and endogenous transport prices this article solves a high frequency model of price arbitrage incorporating storage and trade when the amount of trade is limited by transport capacity constraints in equilibrium there is considerable variation in transport costs because transport costs rise when the demand to ship goods exceeds the capacity limit this variation is necessary to attract shipping capacity into the industry in turn prices in different locations differ by a time varying amount thus while the law of one price holds it holds because of endogenous variation in transport costs

do high skill immigrants trigger high quality trade this paper investigates the links between product quality and the pro trade effect of ethnic networks using a large panel on bilateral stocks of immigrants with information for 19 oecd destination countries and 177 origin countries in line with the approach of rauch and trindade we classify traded goods according to their quality level and separately estimate pro trade elasticity of ethnic networks for each subgroup we allow for heterogeneity of immigrants according to both the level of per capita income of their country of origin and their education level our findings suggest that the trend of the pro trade effect of immigrants over quality seems to be driven by the north south specialisation across varieties for both supply and demand indeed ethnic networks mostly facilitate imports of those varieties for which their countries of origin have a comparative advantage as for exports ethnic networks are more effective in promoting exports to their homeland of those varieties for which there is relatively higher demand we show that the same trend applies to products characterised by the same degree of differentiation according to the classification proposed by rauch and given their lower liquidity constraints and advantages in human capital we find a greater impact of high skilled migrants consistent across all quality levels

capital flows and real exchange rate appreciation in mexico summary following the recently developed bounds testing approach the paper analyzes the long run determinants of the mexican peso s real exchange rate from 1988q1 to 2008q2 controlling for the standard determinants the paper shows that all types of capital inflows tended to appreciate the peso in contrast to recent multi country studies it finds no evidence of a less harmful effect from foreign direct investment fdi on the contrary the fdi s appreciation effect can be particularly strong and interprets this finding the paper also shows that monetary policy through changes in the short term interest differential can have persistent level effects on the real exchange rate

the method of constant market shares analysis reconsidered constant market shares cms analyses are frequently used in applied studies of export development this paper reviews the development of the method and argues that it can be considerably improved a new version of the method is developed which in addition to the familiar cms effects also allows for the calculation of effects reflecting the ability of each country to adapt its export structure to the changes in the commodity and country composition of world imports the method is applied to a sample of 20 oecd countries for the period 1961 83

does the law of one price really hold for commodity prices in spite of the empirical failure of the law of one price it is usually assumed that commodity prices are perfectly arbitraged at least in the long run this paper argues that this assumption is counterfactual and that much of the empirical evidence provided to support it is flawed and affected by econometric shortcomings spurious regressions nonstationarity in the data inappropriate use of first differences an alternative methodology co integration by which a long run relationship between nonstationary series can be tested is proposed tests of nonstationarity and co integration for a group of commodities show quite uniformly that the law of one price as a long run relationship fails and that deviations from the pattern are permanent

minimum cost arborescences in this paper we analyze the cost allocation problem when a group of agents or nodes have to be connected to a source and where the cost matrix describing the cost of connecting each pair of agents is not necessarily symmetric thus extending the well studied problem of minimum cost spanning tree games where the costs are assumed to be symmetric the focus is on rules which satisfy axioms representing incentive and fairness properties we show that while some results are similar there are also signifcant differences between the frameworks corresponding to symmetric and asymmetric cost matrices

some further evidence on the law of one price the law of one price still holds international trade models often postulate the existence of a representative price i e the price which prevails at all markets this is known as the law of one price in this paper the law of one price is tested for seven commodities among four countries by explicitly considering transaction costs the empirical evidence suggests that in most cases the law of one price cannot be rejected asa maintained hypothesis furthermore for the remaining cases transaction costs seem to cause the failure

competition between brazil and other exporting countries in the us import market a new extension of constant market shares analysis this article develops a new extension of the constant market shares model attributing the gains or losses of market share of an exporter in a specific market to its competitors the method is then applied to brazil s exports of manufactured products to the us market determining from which countries and by how much brazil gained market share and to which countries brazil lost market share in the period between 1992 1999 and 2004 the bilateral gains and losses of brazil to oecd countries are shown to be related to changes in the relative unit labour costs of these countries through a two period panel data analysis

international comparisons of pricing to market behavior this paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using u s u k german and japanese industry level data given the industries sampled more price discrimination across destinations is observed in the u k german and japanese data for industries that match across source countries however behavior is very similar across source countries furthermore destination specific price adjustment on exports to the united states from germany and japan is similar to price adjustment observed on shipments to other destinations most variation in the data appears to be related to industry copyright 1993 by american economic association