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Business and Economics > Finance: General

You are looking at 1 - 8 of 8 items for :

  • Type: Journal Issue x
  • Neoclassical Models of Trade x
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Cover IMF Working Papers
Industrial Policy in Europe: A Single Market Perspective
Andrew Hodge
,
Roberto Piazza
,
Fuad Hasanov
,
Xun Li
,
Maryam Vaziri
,
Atticus Weller
, and
Yu Ching Wong
European countries are increasingly turning to industrial policy to address the challenge of geopolitical fragmentation, enhance productivity, and accelerate the green transition. Well-targeted industrial policy has the potential to correct market failures and support production efficiency by exploiting scale effects and internalizing knowledge externalities. But even the most carefully designed unilateral industrial policies risk generating negative production externalities in other countries, and, under certain conditions, may not even be welfare-enhancing for the implementing country. The reason is that negative externalities of unilateral industrial policy can drive European and international production patterns away from underlying comparative advantages, create regional or global over-supply, and result in changes in terms of trade that reduce domestic welfare. This suggests significant benefits from coordination. Structural modeling and case studies show that a coordinated approach within the European Union and with international trading partners on a narrowly defined and carefully designed set of industrial policies could unlock untapped benefits. Closer European integration would facilitate the adjustment of firms and workers to coordinated and well-targeted industrial policies and amplify their benefits.
Keywords:
Industrial policy; European Single Market; State Aid; EU aerospace industry export; EU single market; fishery block exemption regulation; State aid expenditure; single market perspective; Comparative advantage; Demand elasticity; Competition; Terms of trade; Europe; Global
Cover IMF Working Papers
The Power of Prices: How Fast Do Commodity Markets Adjust to Shocks?
Christian Bogmans
,
Andrea Pescatori
,
Ivan Petrella
,
Ervin Prifti
, and
Martin Stuermer
This paper establishes supply and demand elasticities for a broad set of commodities based on a consistent dataset and identification methodology. We apply granular IV methods to a new cross-country panel dataset of commodity production and consumption from 1960-2021. The results indicate that commodity demand and supply are typically price inelastic. Demand and supply tend to be the most inelastic for minerals, whereas they are most elastic for agricultural commodities. The elasticities of energy commodities fall somewhere in between. Supply and demand become more elastic at longer time horizons for mineral and energy commodities, but not for most agricultural commodities.
Keywords:
Commodities; international trade; price elasticities; demand; supply; energy; agriculture; minerals; metals.; commodity demand and supply; energy commodity; supply and demand elasticity; commodity demand and supply elastities; mineral commodity; Agricultural commodities; Demand elasticity; Supply elasticity; Consumption; Global
Cover IMF Working Papers
Geoeconomic Fragmentation and Commodity Markets
Mr. Jorge A Alvarez
,
Mehdi Benatiya Andaloussi
,
Chiara Maggi
,
Alexandre Sollaci
,
Martin Stuermer
, and
Petia Topalova
This paper studies the economic impact of fragmentation of commodity trade. We assemble a novel dataset of production and bilateral trade flows of the 48 most important energy, mineral and agricultural commodities. We develop a partial equilibrium framework to assess which commodity markets are most vulnerable in the event of trade disruptions and the economic risks that they pose. We find that commodity trade fragmentation – which has accelerated since Russia’s invasion of Ukraine – could cause large price changes and price volatility for many commodities. Mineral markets critical for the clean energy transition and selected agricultural commodity markets appear among the most vulnerable in the hypothetical segmentation of the world into two geopolitical blocs examined in the paper. Trade disruptions result in heterogeneous impacts on economic surplus across countries. However, due to offsetting effects across commodity producing and consuming countries, surplus losses appear modest at the global level.
Keywords:
Commodities; international trade; sanctions; spillovers; prices; geoeconomic fragmentation; trade disruption; price change; commodity producer; net-commodity-importing country; trade fragmentation; Commodity markets; Commodity price fluctuations; Agricultural commodities; Inflation; Global
Cover IMF Working Papers
China’s Rebalancing: Opportunities and Challenges for LAC Exporters
Nitya Aasaavari
,
Fabio Di Vittorio
,
Ana Lariau
,
Yuebo Li
,
Rui Mano
, and
Mr. Pedro C Rodriguez
Asia and Latin America and the Caribbean (LAC), two regions with large growth potential, have become increasingly connected over the last 20 years. China has emerged not only as a top trading partner, but also as an important competitor of LAC exports. China’s retreat from certain markets, due to the ongoing rebalancing process, could open new opportunities for LAC exporters but also entail some challenges. Our results show that China’s rebalancing will have an overall positive effect on LAC’s GDP and exports in the long run, but this effect is small and uneven across countries, leading to winners and losers. We also provide evidence that other countries, such as India, are currently trying to fill the gap left by China and could undermine LAC’s competitive advantage in some export markets. In this context, reduction of trade barriers and further integration within the region and/or with the rest of the world would lead to unequivocally positive outcomes for all LAC countries. The COVID-19 shock might exacerbate the effects identified in our analysis.
Keywords:
China’s rebalancing; Latin America and the Caribbean; trade integration; WP; Asia-Lac trade linkage; export category; trade competition index; exports of goods; export dependency; exports of service; Exports; Competition; Comparative advantage; Imports; Real exports; Asia and Pacific; North America; Global; Central America
Cover IMF Staff Country Reports
El Salvador: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper assesses the potential output in El Salvador. Based on various filters and the production function approach, El Salvador’s potential growth is estimated at about 2 percent for 1999–2015, and the output gap is now virtually closed. Potential growth after the global financial crisis has fallen as a result of lower capital accumulation and total factor productivity (TFP). TFP growth depends on technological progress, as well as the institutional, regulatory, and legal environment in which businesses operate. From a cyclical perspective, the economy is assessed to be operating at potential and labor market conditions also appear to be broadly neutral. Strengthening capital and TFP growth going forward is critical to achieve the authorities’ goal of raising potential growth to 3 percent over the medium term. Structural reforms should prioritize mobilizing domestic savings to invest and build a higher capital stock, enhancing research and development/technological diffusion and competition in product and labor markets, strengthening institutions to secure property rights and reduce red tape, improving infrastructure, facilitating access to financing, and fostering human capital to boost TFP growth. Going forward, it is critical to undertake structural reforms to strengthen capital and TFP to raise potential growth.
Keywords:
ISCR; CR; product; policy uncertainty variable; unemployment gap; export products; investment driver; OECD product market regulation Database; fund staff estimate; Total factor productivity; Exports; Output gap; Potential output; Comparative advantage; Global; Central America
Cover IMF Working Papers
The Trade Impact of China on EMU: Is It Even Across Members?
Mrs. Esther Perez Ruiz
and
Mr. Uffe Mikkelsen
This paper investigates the asymmetries in trade spillovers from sector-specific technology shocks in China to selected euro area countries. We use a Ricardian-gravity trade model to estimate sectoral competitiveness in individual euro area countries. Simulations on the impact of productivity shocks in Chinese textiles and machinery suggest that the required adjustment in wages, prices, and factor re-allocation is widely heterogenous across euro area countries on accounts of their different specialization patterns. This raises the question of the distribution of gains and losses from external trade shocks.
Keywords:
WP; International trade; China; European Monetary Union; sectoral specialization; trade share; EMU trade; surplus nation; Ricardian-gravity trade model; textiles' share; goods spending; goods market; nominal wages decline; Euro area; trade theory; exports to the euro area; cost provider; Wages; Trade deficits; Exports; Competition; Global
Cover IMF Working Papers
Financial Globalization, Portfolio Diversification, and the Pattern of International Trade
Miklós Koren
The paper provides a general-equilibrium model where incomplete international financial markets lead to insufficient industrial specialization and low international trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a diversified industrial structure rather than specializing according to their comparative advantage. Financial globalization then induces more specialization and more trade. The present framework yields explicit closed-form solutions for the volume and the structure of trade. Empirical results support the implications of the theory. Trade in financially open countries is (i) higher, (ii) more dependent on productivity differences, and (iii) less sensitive to industry risks.
Keywords:
WP; utility function; max E; financial globalization; trade volume; trade structure; incomplete markets; portfolio choice; productivity shock; Ricardian trade model; goods trade; trade dependence ratio; trade structure estimation; productivity difference; Productivity; Comparative advantage; Consumption; Trade balance; International capital markets; Global
Cover IMF Working Papers
International Trade in Manufactured Products: A Ricardo-Heckscher-Ohlin Explanation with Monopolistic Competition
Ehsan U. Choudhri
and
Ms. Dalia S Hakura
A large data set on trade in manufactured products is used to evaluate the performance of a model that combines both the Ricardian and Heckscher-Ohlin effects and incorporates monopolistic competition. The paper estimates a relation implied by the model to explain relative sectoral exports of major countries to a number of important markets, using 1970-90 data for nine manufacturing sectors. The relation fits the data well and variables suggested by both traditional and new trade models play an important role in explaining relative exports.
Keywords:
WP; least squares; monopolistic competition; Ricardian and Heckscher-Ohlin models; TFP ratio; Ricardian model; composite-factor cost ratio; export relation; productivity variable; TFP relations; Exports; Total factor productivity; Productivity; Trade barriers; Competition; East Asia; Western Europe; Eastern Europe