Menzie Chinn, Hiro Ito, 21 November 2019

Global imbalances have reappeared, somewhat transformed, and relocated. Using data from developing and industrialised countries covering 1972-2016, this column shows that fiscal factors, rather than savings glut variables, have accounted for a noticeable share of the recent variation in imbalances, including in the US and Germany. The contribution of demographic factors is large for industrialised countries but not for emerging markets. Net official flows shape global imbalances in both developing and industrialised countries. 

Yuqing Xing, 11 November 2019

In order to pursue ‘fair trade’, the Trump administration has imposed a punitive 25% tariff on $250 billion’s worth of Chinese goods. However, conventional trade statistics greatly exaggerate the US trade deficit with China. This column uses the iPhone as an example to demonstrate how the trade deficit is inflated and why value-added should be used to assess the bilateral trade balance. If multinational enterprises, including Apple, shift part of their value chains out of China, China may no longer play a central role in global value chains targeting the US market. Depreciation of the yuan will be insufficient to counter the effect. 

Philippe Aghion, Sergei Guriev, Kangchul Jo, 07 November 2019

Moving from low- to high-income status implies that countries escape the middle-income trap. This implies institutional reform to create innovation-based growth. The column uses firm-level data to show how the Korean government's chaebol reforms in the late 1990s transformed the economy from an investment-based to an innovation-based model. There are lessons here for China.

Willem Thorbecke, 06 November 2019

As the trade surpluses of East Asian countries have continued to exist in regional value chains despite the US-China trade war, one possible tool such economies could employ are currency appreciations. This column shows how exchange rates in upstream countries affect China’s exports. No single economy wants to appreciate its currency against the US dollar for fear of losing competitiveness, but a concerted effort to prioritise regional currencies could benefit the set of countries as a whole.

Xavier Jaravel, Erick Sager, 16 October 2019

International trade creates both winners and losers. Using comprehensive price data, this column estimates the US price effects of the China shock from 2000 to 2007. It finds that US consumers benefited from large price declines in product categories in which imports from China increased, as increased trade with China eroded the market power of US producers. The positive impact of the China shock on the purchasing power of US consumers is large in comparison to its negative impact on US jobs.

Li Yang, Filip Novokmet, Branko Milanovic, 09 October 2019

The historically unprecedented economic and social transformation in China over the past four decades has seen urban areas becoming much richer, but also much more unequal. This column analyses changes in the Chinese urban elite. It finds that, compared to the 1980s, the elite today consists mainly of professionals, self-employed, and smaller and larger business people, they are much better educated, and they receive a much greater share of total urban income. This is reflected also in the composition of the Communist Party of China.

Stefania Garetto, Lindsay Oldenski, Natalia Ramondo, 08 October 2019

Multinational enterprises play an important role in coordinating production around the globe. This column presents a dynamic quantitative model of multinational enterprise expansion that can be used to analyse the effects of policies that affect the cost of the operations of such firms. It uses this model to estaimte the impact of potential implementations of Brexit.

Axel Dreher, Andreas Fuchs, Roland Hodler, Bradley Parks, Paul Raschky, Michael Tierney, 07 October 2019

Chinese development projects have the potential to improve the lives of millions of people, but political capture of its development finance by politicians may undermine its effectiveness. This column examines local development outcomes across 47 African countries and the effects of financial support from China between 2001 and 2012. The results not only show that Chinese aid registers positive effects on economic development at the district-level and province-level, but also that political bias in the subnational distribution of Chinese aid does not substantially undermine local development outcomes.

Scott Baker, Nicholas Bloom, Steven Davis, 17 September 2019

Tariff threats, hikes, and retaliations have become a major source of economic uncertainty and stock market volatility. This column draws on three initiatives to demonstrate that recent rise in trade policy uncertainty, driven by the US withdrawal from the Trans-Pacific Partnership, tariff hikes on US steel and aluminium imports, ongoing Brexit uncertainty, and escalating US-China trade tensions, is extraordinary by several metrics. 

Panle Jia Barwick, Myrto Kalouptsidi, Nahim Bin Zahur, 11 September 2019

Despite the prevalence of industrial policies around the world, few empirical studies directly evaluate their welfare consequences. This column reveals that the scale of China’s industrial policy targeting the shipbuilding industry is massive, with the lion’s share going to entry subsidies. The effectiveness of different policy instruments is mixed, and the efficacy of industrial policy is significantly affected by the presence of boom and bust cycles, and by heterogeneity in firm efficiency. The ‘white list’ of firms chosen for government support did not include the most efficient firms. 

Johannes Eugster, Florence Jaumotte, Margaux MacDonald, Roberto Piazza, 10 September 2019

Bilateral trade balances have come under scrutiny recently, with some policymakers concerned that their large and rising size may reflect asymmetric obstacles to trade. This column argues that macroeconomic factors – rather than bilateral tariffs – have been the key drivers of the evolution of bilateral trade balances. While tariffs have played a modest role in the evolution of bilateral balances, declines in tariffs have lifted productivity by allowing a greater international division of labour, including through participation in global value chains. A sharp increase in tariffs would therefore create significant spillovers, leaving the global economy worse off. 

Daniel Gros, 09 September 2019

Traditional analysis of tariffs in a partial equilibrium setting can tell us much about the welfare consequences of the US-China trade war. The column argues that, as tariffs ratchet up, welfare costs for both sides increase disproportionately. The cost of trade diversion in the US to less-efficient suppliers likely overwhelms any terms-of-trade gain the US might enjoy. In all cases, exporters in the rest of the world benefit.

Alan Bollard, 05 September 2019

The World Wars precipitated unprecedented economic problems in all countries. This column, part of a Vox debate on the economics of WWII, describes how economists played a larger role in WWII than in any previous conflict. They advanced the methods of public finance and influenced the directions of the war effort. By the end of the war, economists were widely embedded in government and policymaking.

David Jacks, Dennis Novy, 23 July 2019

Against the backdrop of new tariffs imposed by the Trump administration and retaliation from targeted countries, notably China, the trade wars of the 1930s have received renewed attention. This column argues that they mainly served to intensify a pre-existing trend towards the formation of trade blocs. The trade wars of the present day may therefore serve a similar purpose as those in the 1930s, that is, the intensification of China- and US-centric trade blocs.

Marlene Amstad, Zhiguo He, 16 July 2019

China’s corporate bond ratings are sharply skewed upward, which is partly explained by the large amounts of bonds by issuers who are mostly linked to the government. This column proposes credit spreads as an alternative, market-based measure of credit risk. It also argues that the main reason for the high credit ratings and low dispersion of credit spreads is the very short and limited history of defaults in China. The post-2014 sharp rise in corporate bond defaults is therefore essential for further market development, particularly because Chinese defaults remain low relative to global standards.

Francois de Soyres, Alen Mulabdic, Michele Ruta, 12 July 2019

Common transport infrastructure can improve welfare for participating countries, but they are costly undertakings with potentially asymmetric effects on trade and income of individual countries. This column uses new data on China’s Belt and Road transport projects to quantify the economic impact of the initiative. Welfare in participating countries could increase by 2.8% if all projects are implemented, but some countries have a negative welfare effect because of the high cost of the infrastructure. 

Xuepeng Liu, Huimin Shi, 11 July 2019

The US-China trade war has continued for almost a year, but its effectiveness in preventing some Chinese origin products reaching the US may not be as great as it seems. This column shows how trade re-routing has been used in the past to circumvent antidumping duties in the context of trade tariffs. Firms may be able to avoid tariffs by sending their products to a third country, where the goods are reissued certificates of origin and then sent to the final destination country without being subject to the same tariffs.

Jason Garred, 09 July 2019

Like other countries participating in the multilateral trading system, China agreed to limit the use of import tariffs when it joined the WTO. As this column shows, however, it continued to employ other instruments of trade policy, including a new set of restrictions on exports which partly restored the asymmetric treatment of Chinese industries embodied in its pre-WTO import tariffs. Today's tariff wars appear to be just the latest example of an ongoing battle whose skirmishes have taken many forms.

Johannes Eugster, Giang Ho, Florence Jaumotte, Roberto Piazza, 12 June 2019

Technology diffusion to emerging markets helps share growth potential across countries and lift global living standards. Using a global patent citation dataset, this column estimates the magnitude and impact of international knowledge and technology diffusion, as well as the role that globalisation has played. In emerging markets, knowledge flows have increased innovation and productivity. Competition from emerging markets benefits global innovation.

Debin Ma, 04 June 2019

Over the last four decades, China’s economy grew at an astonishing pace while remaining firmly in the grip of an authoritarian political regime, thereby upending long-settled economic models. But an earlier era in Chinese history tells a different story. This column examines the period from 1900 to 1937, when rules governing the treaty port of Shanghai attracted major Western banks (and sheltered the Bank of China’s Shanghai branch) by curbing or side-stepping state power. This is a rare glimpse into a period of Chinese history in which financial practices were largely freed from the constraints of authoritarian rule. 

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