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

the nonlinear relationship between terrorism and poverty in spite of the common wisdom that poverty breeds terrorism in their meta study gassebner and luechinger 2011 report that the two robust explanatory variables for terrorism are population and various measures of democratic freedom but not per capita gdp their results from 13 4 million different regressions estimated using various combinations of the 65 variables contained in 43 different studies indicate no significant causal effects between terrorism and per capita gdp we add to the large and growing literature on the relationship between terrorism and poverty in two ways first unlike previous studies we use a dataset that decomposes the number of terrorist acts into domestic and transnational incidents we show that poverty has a very distinct effect on each type of terrorism second we use split sample and smooth transition regression star estimation techniques to allow for a nonlinear relationship between terrorism and poverty when we account for the nonlinearities in the data and distinguish between the two types of terrorist events we find that poverty has as a very strong influence on domestic terrorism and a small but significant effect on transnational terrorism

an investigation of the effects of exchange rate volatility on exports in east asia abstractthis study investigates the effects of the exchange rate volatility on the export flows of indonesia malaysia republic of korea singapore thailand and the philippines during 1974 2011 towards this goal a trade weighted real effective rather than the bilateral exchange rate and three different measures of volatility i e obtained from an arch model a garch model and a moving average standard deviation measure are used in this study specifically the export flows between six asian countries and the rest of the world are investigated rather than focusing on trade with only one country our findings reveal that the exchange rate volatility has a significant impact on export flows in the short run as well as in the long run for all the countries in the sample the impact in the long run is predominantly negative with the exception of singapore but in the short run the impact varies across countries moreover our results are robust to the alternative measures of volatility used and most of

volatility and irish exports we analyse the impact of volatility per se on real exports for a small open economy concentrating on irish trade with the uk and the us an important element is that we take account of the time lag between the trade decision and the actual trade or payments taking place by using a flexible lag approach rather than adopt a single measure of risk we also adopt a spectrum of risk measures and detail varied size characteristics and statistical properties we find that the ambiguous results found to date may be due to not taking account of the timing effect which varies substantially depending on which volatility measure is used

china as a final market the gabon timber and thai cassava value chains rapid economic growth in china has boosted its demand for commodities in many commodities sectors this has been associated with declining demand from high income northern economies this paper examines two hypotheses of the resulting outcomes for the organization of global value chains in general and for the role played by low income producers in particular the importance of standards in global value chains and the space available for low income producers to upgrade into higher value niches in their chains the detailed case studies of the thai cassava industry and the gabon timber sector both confirm these hypotheses

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

conditional exchange rate volatility and the volume of foreign trade evidence from seven industrialized countries there has long been a concern over the volatility of exchange rates and their impact on the volume of foreign trade however very little attention has been paid to the choice of an appropriate volatility variable as well as the proper specification of the trade equation the sample standard deviation of the exchange rate has been used as a proxy for exchangerate uncertainty in empirical studies that examine the effects of exchange rate uncertainty on the volume of foreign trade see for example akhtar and hilton 1 and gotur 27 these studies have provided conflicting evidence on this issue it has been argued that use of the sample standard deviation is inappropriate because the empirical distribution of exchange rates is not normal 22 10 in this regard subsequent empirical research 12 36 40 41 11 has employed a moving standard deviation of the rate of change of the exchange rate as a proxy for exchange rate uncertainty chowdhury 11 obtained a clear pattern of results that support the hypothesis that the higher volatility of exchange rates led to a reduction in international trade transactions after the breakdown of the bretton woods system in march 1973 other studies have reported ambiguous results 2 the moving standard deviation used in these studies has been criticized in the literature for a ignoring relevant information on the random process generating exchange rates 18 b underestimating the effect of volatility on decisions 52 c distorting the measurement of the volatility variable by smoothing the series 9 and d injecting an element of arbitrariness into the calculation through decisions about the order m of the moving average 43 3

structural change and the bop constraint why did latin america fail to converge this paper discusses why latin america failed to achieve sustainable convergence with the developed world since 1960 and analyses different phases of convergence and divergence using a structuralist keynesian approach first it is argued that there are critical differences between latin america the developed economies and the asian economies as regards the evolution of the income elasticity of the demand for imports the rate of growth of exports and the balance of payments constrained rate of growth the income elasticity of the demand for imports in latin america showed an upward trend particularly after the mid 1970s which was not matched by a similar increase in exports a pattern in sharp contrast with that of the east asian countries the evolution of and exports are used to set forth a typology of latin american economic growth since 1960 in addition the paper relates elasticities and the less favourable latin american performance to the intensity and direction of structural change using a broad sample of developed and developing economies it is shown that the developing countries that succeed in reducing the income gap are those that transformed their economic structures in favour of sectors with higher schumpeterian and keynesian efficiency copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

assessing the variability of inflation although there has been much argument over the impact of variable inflation rates upon economic performance there has been surprisingly little attempt to define the term variability of inflation carefully or to test proposed hypotheses connecting variability and the level of inflation precise definitions are given in the paper and a model is constructed showing that the level variability hypothesis may be formulated in terms of the presence of heteroscedasticity in a regression model this theoretical model is used to criticize existing studies while an empirical study with australian data illustrates the application of the approach

openness and wage inequality in developing countries the latin american challenge to east asian conventional wisdom the experience of east asia in the 1960s and 1970s supports the theory that greater openness to trade tends to narrow the wage gap between skilled and unskilled workers in developing countries in latin america since the mid 1980s however increased openness has widened wage differentials this conflict of evidence is probably not the result of differences between east asia and latin america instead the conflict is probably the result of differences between the 1960s and the 1980s specifically the entry of china into the world market and perhaps the advent of new technology biased against unskilled workers

testing the stochastic structure of production a flexible moment based approach conventional production function specifications are shown to impose restrictions on the probability distribution of output that cannot be tested with the conventional models these restrictions have important implications for firm behavior under uncertainty a flexible representation of a firm s stochastic technology is developed based on the moments of the probability distribution of output these moments are a unique representation of the technology and are functions of inputs large sample estimators are developed for a linear moment model that is sufficiently flexible to test the restrictions implied by conventional production function specifications the flexible moment based approach is applied to milk production data the first three moments of output are statistically significant functions of inputs the cross moment restrictions implied by conventional models are rejected

persistent trade effects of large exchange rate shocks this paper presents a theoretical basis for the argument that large exchange rate shocks such as the 1980s dollar cycle may have persistent effects on trade flows and the equilibrium exchange rate itself we begin with a partial equilibrium model in which large exchange rate fluctuations lead to entry or exit decisions that are not reversed when the currency returns to its previous level then we develop a simple model of the feedback from hysteresis in trade to the exchange rate itself here we see that a large capital inflow which leads to an initial appreciation can result in a persistent reduction in the exchange rate consistent with trade balance

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

exchange rate volatility exchange rate regime and trade volume evidence from the uk us export function 1889 1999 abstract this paper investigated the impact of exchange rate volatility and exchange rate regime on the british exports to the united states using data for the period 1889 1999 the empirical findings suggest that neither exchange rate volatility nor the different exchange rate regimes that spanned the last century had an effect on export volume

inequality and crime this paper considers the relationship between inequality and crime using data from urban counties the behavior of property and violent crime are quite different inequality has no effect on property crime but a strong and robust impact on violent crime with an elasticity above 0 5 by contrast poverty and police activity have significant effects on property crime but little on violent crime property crime is well explained by the economic theory of crime while violent crime is better explained by strain and social disorganization theories

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

income inequality and violent crime evidence from mexico s drug war the relationship between income inequality and crime has attracted the interest of many researchers but little convincing evidence exists on the causal effect of inequality on crime in developing countries this paper estimates this effect in a unique context mexico s drug war the analysis takes advantage of a unique data set containing inequality and crime statistics for more than 2 000 mexican municipalities covering a period of 20 years using an instrumental variable for inequality that tackles problems of reverse causality and omitted variable bias this paper finds that an increment of one point in the gini coefficient translates into an increase of more than 10 drug related homicides per 100 000 inhabitants between 2006 and 2010 there are no significant effects before 2005 the fact that the effect was found during mexico s drug war and not before is likely because the cost of crime decreased with the proliferation of gangs facilitating access to knowledge and logistics lowering the marginal cost of criminal behavior which combined with rising inequality increased the expected net benefit from criminal acts after 2005

regime switching analysis for the impacts of exchange rate volatility on corporate values a taiwanese case a second moment regime switching model with not only a switching intercept and a switching slope but also a switching error variance is applied to examine the impacts of exchange rate volatility erv on corporate values cv for the 10 industries investigated in taiwan two different regimes categorized as strong impact and weak impact are identified the dominant power varies from one industry to another the wald statistics for the null of equality are ambiguous which show that if the markov switching ms model is plausible then the erv might not be one major factor but another factor that could switch the cv of taiwan s industries for the model s volatility influence the data of 8 out of 10 industries are shown to fit a two state model when the volatility is stimulated a two state first order ms model is appropriate for the goodness of fit analysis at the 10 significant level

diverse twins analysing china s impact on italian and german exports using a multilevel quantile regressions approach abstractgermany and italy are the largest manufacturing producers in europe and export over 70 of their products to oecd countries while they share many characteristics they are also diverse in term of specialization and destination markets italy has a productive structure largely based on labour intensive sectors while germany is mainly specialized in high tech goods we study whether these characteristics make the two countries vulnerable in different ways to the competitive pressure by emerging economies especially china which experienced the strongest increase in export market share during the last decades we discuss the impact of china on the export performance of italy and germany on oecd markets using data for the period 1995 2009 we implement a novel model to account for two important data characteristics their hierarchical hidden structure captured by a multilevel model and the heterogeneity of the export shares captured by a quantile approach results show that chinese competition

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

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

exchange risk exposure and the option to trade rather than impeding trade increased exchange rate uncertainty may on average create trade as it implies a higher probability that ex post deviations from commodity price parity will exceed tariffs and transportation costs we demonstrate such an effect in a small country short term model under the alternative assumptions of perfect competition and of a monopolist trader producer the proofs rely on the fact that such firms exposures can be replicated and hedged by standard options under partial monopoly scenarios the effect of volatility is ex ante unclear though jel f31

the impact of china on latin america and the caribbean summary the rapid growth of china and its increased integration with the global economy is having both direct and indirect effects on the latin american and caribbean region the paper focuses on the impacts of china on latin american trade and foreign direct investment flows it identifies the main channels through which china s growth is affecting the region and undertakes a preliminary analysis of the impacts on development it is shown that there are winners and losers in the region both at the country and sector level

comparative advantage in manufactured goods a re appraisal japanese input coefficients are used to investigate the pattern of comparative advantage in the exportation of manufactured products in a cross country framework estimates are made for the imports of manufactured products as well as for net exports also alternative techniques of estimation are utilized and an attempt to explain the residuals in the regression equations and to indicate the predictive power of these equations is made the paper shows that patterns of comparative advantage in manufactured goods can be explained by reference to commodity characteristics and country characteristics in turn intercountry differences in the extent of trade orientation the concentration of exports and foreign direct investment explain part of the residuals of the cross country regression equations finally it has been found that the method applied permits projecting the factor intensity of trade for individual countries

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

real exchange rate volatility and the us bilateral trade a var approach this paper uses var models to investigate the impact of real exchange rate volatility on u s bilateral imports from the united kingdom france germany japan and canada the var systems include u s and foreign macro variables and are estimated separately for each country the major results suggest that the effect of volatility on imports is weak although permanent shocks to volatility do have a negative impact on this measure of trade and those effects are relatively more important over the flexible rate period copyright 1989 by mit press

the econometric analysis of models with risk terms summary in this paper we have attempted to provide an integrated approach to the estimation of models with risk terms it was argued that there exist orthogonality conditions between variables in the information set and higher order moments of the unanticipated variable density these could be exploited to provide consistent estimators of the parameters associated with the risk term specifically it was recommended that an iv estimator should be applied with instruments constructed from the information set four existing methods commonly used to estimate models with risk terms are examined and applications of the techniques are made to the estimation of the risk term in the us c exchange market and the effects of price uncertainty upon production

crime inequality and unemployment in england and wales a model of crime is developed based on principles from the existing literature with some original insight the implications of the model are that income inequality and unemployment are important explanatory variables for crimes motivated by economic gain but do not offer much explanatory power for other types of crime panel data of uk regions over the years from 2002 to 2007 are then used to test these predictions the empirical results strongly support the hypothesis that crime is an economic phenomenon

who profits from innovation in global value chains a study of the ipod and notebook pcs in an era when new ideas are brought to the market by global value networks of specialists rather than by one company a key question is who captures the most value from innovation in such a structure and why this paper addresses the question of who benefits from innovation in global value chains by looking at specific computer and electronics products we apply a novel industry studies methodology for measuring the distribution of financial value across the supply chains for two models from apple s ipod family and notebook pc models from lenovo and hewlett packard hp these are all examples of globally innovated products combining technologies from the u s japan and other countries and assembled in china our analysis shows that the gross margins of apple for its high end ipod products are generally higher than those earned by hp and lenovo for notebook pcs although not so high as to be considered supernormal a key reason for the difference is that apple s control of the core software proprietary standards and complementary infrastructure of the ipod enables it to retain greater profits whereas a large share of the pc industry profits are siphoned off to microsoft and intel who control key technical standards consistent with teece 1986 our results confirm the importance of stages of technical evolution appropriability regimes and complementary assets as determinants of profiting from innovation on the other hand we find that manufacturing has become commoditized and is no longer a key to profiting from innovation in final electronic products also contrary to recent suggestions in the literature we find no evidence of a causal link between product and industry architectures instead there is a vast electronics industry architecture that can easily support product level value chain configurations ranging from modular to integrated

does income inequality lead to more crime a comparison of cross sectional and time series analyses of united states counties abstract this paper estimates the effect of income inequality on crime in united states counties using both cross sectional and first differenced approaches income inequality is positively associated with crime rates in the cross section analysis but negatively associated with crime rates in the time series analysis

exchange rate variability and trade why is it so difficult to find any empirical relationship this paper discusses why previous literature has found little evidence of any effect of exchange rate variability on international trade methodological and statistical issues are discussed in particular comparisons are made of estimations based on different specifications or using different data sets and changes in the results depending on the method used are shown

short run fluctuations in foreign exchange rates evidence from the data 1973 1979 abstract the paper examines the statistical properties of daily changes in foreign exchange fx rates for nine currencies it finds that these changes are leptokurtotic i e have long tailed and sharp peaked histograms the evidence suggests that this leptokurtosis does not arise from an underlying paretian stable distribution nor from a stationary mixture of normal distributions but rather from normal processes with time varying parameters this finding casts doubt on the validity of many standard techniques t stats arima methods some moving statistics for estimating the time varying parameters are also presented

exchange rate pass through when market share matters the authors investigate the pass through from exchange rates to import prices when firms future demands depend on their current market shares they show that profit maximizing foreign firms may either raise or lower their dollar export prices when the dollar appreciates temporarily i e the pass through may be perverse and that current import prices may be more sensitive to expected future exchange rates than to current exchange rates they present evidence that suggests the behavior of expected future exchange rates may provide a clue to the puzzling recent behavior of u s import prices copyright 1989 by american economic association

crime during the business cycle urban rural differences abstractdespite the abundant literature on how crime evolves over the business cycle no consensus has arisen whether crime increases or decreases during recessions the literature provides both po

neighbourhood income inequality and property crime this paper examines the relationship between income inequality and property crime using census block group data from three us cities nashville tn portland or and tucson az this paper is one o

income inequality and pecuniary crimes abstract this paper verifies the relationship between income inequality and pecuniary crimes the elasticity of pecuniary crimes relative to inequality is 1 46 corroborating previous literature other factors important to decrease criminality are expanding job opportunities and a more efficient legal system

the value of time and recent u s money demand instability much controversy has surrounded the u s money demand relationship or more precisely its stability this is rather disappointing in light of the central importance of money demand estimates for the formulation and implementation of effective monetary policy and for almost all theories of aggregate economic activity to date the vast majority of alternative money demand specifications have generally failed to produce a stable money demand function throughout the 1970s and 1980s

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

the effects of china s growth on the food prices and the food exports of other developing countries this article explores the impacts of china s growth in the international markets of agricultural products along two dimensions food price inflation and export growth in other developing countries china s food imports of vegetable oils have grown dramatically over the last decade linking china s economic growth to the recent increases in global food prices if china is a source of global food price inflation exporting countries will benefit whether they sell directly to china or not these direct and indirect linkages are explored using a short run partial equilibrium model of international trade in agricultural products in which consumer prices and trade costs are derived from bilateral trade flows china s effects on food prices and exports are estimated by reducing chinese food expenditures in 2007 by half roughly china s level of expenditures in 1995 results indicate that food prices as measured by ces price indexes in developing asia africa and latin america would have been reduced by 1 27 0 32 and 0 22 respectively china has been an important source of growth for exporters selling directly to china there is no evidence of export growth due to an overall increase in food prices caused by china s growth

estimates of the variance of u s inflation based upon the arch model it is generally agreed that the unpredictability of future inflation is a major component of the welfare loss associated with inflation perfectly predicted inflation might induce some costs through institutional rigidities governmental interference and transaction costs but in the long run these should be rather minimal as these institutions adopt various forms of indexing when inflation is unpredictable risk averse economic agents will incur a loss even if prices and quantities are perfectly flexible in all markets inflation is a measure of the relative price of goods today and goods tomorrow thus uncertainty in tomorrow s price impairs the efficiency of today s allocation decisions friedman in his nobel lecture 8 argues convincingly that higher variability of inflation would lead to decreased output ceteris paribus he then conjectures that higher rates of inflation are generally associated with higher variability of inflation and presumably greater uncertainty about future rates if this is true then higher rates of inflation would also be associated with low levels of output which implies a positively sloped phillips curve this paper uses a new statistical technique arch to estimate the conditional mean and variance of inflation from u s time series data the main finding is that the variance of inflation in the seventies was only slightly greater than in the sixties

revisiting the revisited terms of trade will china make a difference in challenging the conventional wisdom at the time singer and prebisch posited a number of explanations for declining terms of trade of developing economies including both country and product specific factors over the past decade we have begun to witness a simultaneous process of price differentiation within commodities with the prices of some commodities increasing and within manufacturing with the price of many manufactures falling these price changes may reverse the decline in the terms of trade of commodity producers the entry of china into the global market has played an important role in this augmenting the demand for many hard commodities its role as an exporter of manufactures coupled with concentration in global buying may undermine the prices of many manufactures

exchange rate effects on the relationship between fdi and trade in the u s food processing industry the effect of exchange rates on international trade and more specifically on agricultural trade flows has been documented by several studies most studies agree that an appreciation depreciation in the value of the u s dollar hurts helps u s agricultural exports an appreciation of the u s dollar raises the cost of u s products to foreign buyers and reduces their purchases 2 although neglected early on the effect of exchange rate risk as measured by its volatility on trade flows was also found to be negative arize pick parallel to this literature were the devel

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