International trade

Javier Cravino, Andrei Levchenko, 22 October 2016

Multinational production has become one of the most important means by which firms serve foreign markets. This column examines the role of multinational firms in aggregate business cycle transmission. The results suggest that the combined impact of all foreign multinationals is small but significant, accounting for about 10% of the productivity shocks in a typical country and leading to a somewhat more synchronised international business cycle.

Derek Kellenberg, Arik Levinson, 21 October 2016

A recent UN study claims that a large share of exports from developing countries goes unreported and that smuggling is a likely explanation. But many analysts argue that the discrepancies are statistical errors. This column suggests that although some malfeasance is at play as the trade gap is correlated with tariffs and corruption, this statistical relationship cannot identify countries or shipments that are corrupted. There's smoke, but no smoking gun.

Jean-Noël Barrot, Erik Loualiche, Matthew Plosser, Julien Sauvagnat, 21 October 2016

In the years preceding the Great Recession there was a dramatic rise in household debt in the US, and an increase in import competition triggered by the expansion of China and other low-wage countries. This column uses consumer credit data to argue that these phenomena are intimately linked. Household debt levels increased significantly in counties where US manufacturing jobs shifted overseas, and regional exposure to import competition explains 30% of the cross-regional variation in the growth in household debt.

Andrew Rose, 19 October 2016

The pro-trade effects of the euro are a clear-cut benefit of Eurozone membership, but scholarly estimates of the size of this effect vary widely. This column uses meta-analysis to argue that the variation stems from inappropriate exclusion of nations and years. When all countries and years available in the data are included, the estimate of the euro trade effect is economically and statistically large, at about 50%.

Alexander Al-Haschimi, Martin Gächter, David Lodge, Walter Steingress, 14 October 2016

Exceptionally weak global trade growth over recent years has presented a puzzle to academics and policymakers alike. This column presents a study by an expert network across European central banks which suggests that it may actually be the past strength of trade which was exceptional, rather than the subsequent slowdown. The recent deceleration of trade growth can thus be seen as a ‘great normalisation’. The important implication is that an upturn in aggregate demand will not necessarily lead to a significant recovery in global trade.

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