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Europe > Ireland

You are looking at 1 - 10 of 18 items for :

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  • Empirical Studies of Trade x
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Cover IMF Working Papers
Trade Uncertainty and Investment in the Euro Area
Mr. Christian H Ebeke
and
Jesse Siminitz
We analyze the impact of trade policy uncertainty on investment in the euro area. Our identification strategy assumes that countries that are relatively more dependent on global trade networks exhibit a higher sensitivity of investment with respect to trade uncertainty. We find that the investment-to-GDP ratio is on average 0.8 percentage points lower for five quarters following a one standard deviation increase in the level of trade uncertainty. We demonstrate that these results are unlikely to be driven by omitted variables and that they are robust to different measures of trade uncertainty and trade openness. Our analysis suggests that the detrimental effect of trade tensions goes beyond lower trade growth, as uncertainty can reduce investment and the economy’s long-term growth potential.
Keywords:
trade tensions; uncertainty; trade openness; investment; euro area; trade uncertainty; uncertainty shock; area trade flow; trade growth; trade openness variable; tension indicator; trade measure; trade tension level; uncertainty variable; Trade policy; Trade balance; Protectionism; Exports; Global
Cover IMF Working Papers
Reassessing the Productivity Gains from Trade Liberalization
Mr. JaeBin Ahn
,
Ms. Era Dabla-Norris
,
Mr. Romain A Duval
,
Bingjie Hu
, and
Lamin Njie
This paper reassesses the impact of trade liberalization on productivity. We build a new, unique database of effective tariff rates at the country-industry level for a broad range of countries over the past two decades. We then explore both the direct effect of liberalization in the sector considered, as well as its indirect impact in downstream industries via input linkages. Our findings point to a dominant role of the indirect input market channel in fostering productivity gains. A 1 percentage point decline in input tariffs is estimated to increase total factor productivity by about 2 percent in the sector considered. For advanced economies, the implied potential productivity gains from fully eliminating remaining tariffs are estimated at around 1 percent, on average, which do not factor in the presumably larger gains from removing existing non-tariff barriers. Finally, we find strong evidence of complementarities between trade and FDI liberalization in boosting productivity. This calls for a broad liberalization agenda that cuts across different areas.
Keywords:
WP; input tariff; output tariff; tariff data; Trade; Productivity; Tariffs; Inputs; Liberalization; FDI; Reforms; Growth; tariff rate; complementarity regression; tariff liberalization; Total factor productivity; Foreign direct investment; Trade liberalization; Global; research department; fiscal affair; productivity gains from trade liberalization
Cover IMF Working Papers
Fiscal Devaluation in a Monetary Union
Philipp Engler
,
Mr. Giovanni Ganelli
,
Juha Tervala
, and
Simon Voigts
Using a DSGE model calibrated to the euro area, we analyze the international effects of a fiscal devaluation (FD) implemented as a revenue-neutral shift from employer's social contributions to the Value Added Tax. We find that a FD in ‘Southern European countries’ has a strong positive effect on output, but mild effects on the trade balance and the real exchange rate. Since the benefits of a FD are small relative to the divergence in competitiveness, it is best addressed through structural reforms.
Keywords:
WP; Southern European countries; expenditure switching; Fiscal devaluation; fiscal policy; euro area; currency union; current account; output effect; Southern European countries of the Southern European countries; trade balance effect; open economy; expenditure switching effect; households in Southern European countries; imperfect competition; fiscal devaluation in Southern European countries; deficit in Southern European countries; devaluation in Southern European countries; Value-added tax; Trade balance; Consumption; Personal income tax; Southern Europe
Cover IMF Working Papers
Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments
Mr. Thierry Tressel
and
Mr. Shengzu Wang
The paper examines progress with the external rebalancing of euro area deficit countries. Relative prices are adjusting at different pace across countries and with different compositions of wage cuts and labor shedding. There is so far limited evidence of resource re-allocation from non-tradable to tradable sectors, while improved export performance is still dependent on external demand from the rest of world. Current account adjustments have taken place, reflecting structural changes but also cyclical forces, suggesting that part of the improvements may unwind when cyclical conditions improve. Looking ahead, relying only on relative price adjustments (which adversely affects demand) to rebalance the euro area could prove very challenging. Structural reforms will play an important role in the reallocation of resources to the tradable sector and the associated relative price adjustment, while boosting non-price and price competitiveness.
Keywords:
WP; deficit country; output gap; Rebalancing; Imbalances; Current Account; Euro Area; export performance; import shifter; current account adjustment; Export performance; Exports; Potential output; Labor costs; Global
Cover Staff Discussion Notes
Adjustment in Euro Area Deficit Countries: Progress, Challenges, and Policies
Mr. Thierry Tressel
,
Mr. Shengzu Wang
,
Mr. Joong S Kang
,
Mr. Jay C Shambaugh
,
Mr. Jörg Decressin
, and
Ms. Petya Koeva Brooks
Imbalances within the euro area have been a defining feature of the crisis. This paper provides a critical analysis of the ongoing rebalancing of euro area “deficit economies” (Greece, Ireland, Portugal, and Spain) that accumulated large current account deficits and external liability positions in the run-up to the crisis. It shows that relative price adjustments have been proceeding gradually. Real effective exchange rates have depreciated by 10-25 percent, driven largely by reductions in unit labor costs due to labor shedding. While exports have typically rebounded, subdued demand accounts for much of the reduction in current account deficits. Hence, the current account balance of the euro area as a whole has shifted into surplus. Internal rebalancing has come with subdued activity—notably very high unemployment in the deficit economies—and made continued adjustment more difficult. To advance rebalancing further, the paper emphasizes the need for: (1) macroeconomic policies that support demand and bring inflation in line with the ECB’s medium-term price stability objective; (2) continued EMU reforms (banking union) to ensure proper financial intermediation; and (3) structural reforms in product and labor markets to improve productivity and support the reallocation of resources to tradable sectors.
Keywords:
SDN; deficit country; deficit economy; area country; countries vis-à-vis; financial system; labor market; Euro Area; Crisis; Current account; Rebalancing; Competitiveness; External stability; Structural reforms; Potential output; Current account deficits; Output gap; Price adjustments; Global
Cover IMF Research Bulletin
Research Bulletin, June 2014
International Monetary Fund. Research Dept.
Articles in the June 2014 issue of the IMF Research Bulletin look at “The Rise and Fall of Current Account Deficits in the Euro Area Periphery and the Baltics” (Joong Shik Kang and Jay C. Shambaugh) and “The Two Sides of the Same Coin?: Rebalancing and Inclusive Growth in China” (Il Houng Lee, Murtaza Syed, and Xin Wang). The Q&A looks at “Seven Questions on the Monetary Transmission Mechanism in Low-Income Countries” (Andrew Berg, Luisa Charry, Rafael A. Portillo, and Jan Vleck). This issue of the Research Bulletin includes updated listings of IMF Working Papers, Staff Discussion Notes, and Recommended Readings from the IMF Bookstore. Readers can also find information on free access to a featured article from “IMF Economic Review.”
Keywords:
IRB; IMF research bulletin; bulletin; journal website; policy relevance; author guideline; debt challenge; sample content; Current account deficits; Trade balance; Income inequality; Current account; Personal income; Global; Caribbean; Baltics; Sub-Saharan Africa
Cover IMF Working Papers
Cross-Country Experience in Reducing Net Foreign Liabilities: Lessons for New Zealand
Ding Ding
,
Mr. Werner Schule
, and
Ms. Yan M Sun
This paper studies the dynamics of net foreign liabilities across a number of countries. Our historical analysis suggests that an orderly reduction in a country’s net foreign liabilities has mostly occurred when there was significant improvement in gross public savings through deliberate fiscal consolidation measures. Simulations of a dynamic general equilibrium model calibrated for New Zealand indicates that sustained government deficit reduction could improve the country’s net foreign assets by about half of the accumulated public savings. However, given New Zealand’s relatively strong fiscal positions and previous work noting structurally low household savings, an orderly improvement in New Zealand’s external position in the medium term will depend on a structural improvement in private savings.
Keywords:
WP; GDP; crisis; private sector; Net foreign liabilities; Current account balance; Public savings; Fiscal consolidation; crisis risk; exchange rate; crisis database; gross private sector debt; inflation crisis; reductions in NFL; New Zealand's NFL; Foreign liabilities; Foreign assets; Trade balance; Global
Cover IMF Working Papers
The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics: Many Paths to the Same Endpoint
Mr. Joong S Kang
and
Mr. Jay C Shambaugh
Explanations of the large current account deficits for the euro area periphery and the Baltics in the run up to the crisis revolve around two main factors: deteriorating export performance or demand driven booms. We add that there were important movements in transfers and net income balances. While export performance remained relatively stable in most countries, for some countries, when transfers declined, households and firms borrowed so as to maintain the same level of spending. This was part of a persistent failure to adjust to trade deficits, which, along with rising net income payments, led to growing current account deficits. All of these factors played varying roles in the development of current account deficits across these countries.
Keywords:
WP; export; deficit; IMF staff calculation; current account deficit; transfer; income balance; competitiveness; domestic boom; merchandise export market share; Merchandise export market share; current account improvement; import volume growth; export sector performance; export decline; estimate export performance; export market share; export volume; current account development; current account movement; Current account deficits; Current account; Trade balance; Exports; Export performance; Baltics; Global
Cover IMF Working Papers
Rebalancing: Evidence from Current Account Adjustment in Europe
Mr. Ruben V Atoyan
,
Mr. Jonathan F Manning
, and
Jesmin Rahman
After the 2003-2007 economic boom, European countries with large pre-crisis current account imbalances are undergoing adjustments. Countries are adjusting at different paces and ways reflecting the source and magnitude of imbalances, availability of financing, competitiveness of the tradable sector and external environment. While emerging European countries with large pre-crisis imbalances and a fixed exchange rate regime have seen sharp current account adjustments and a rebound in growth, adjustment in the euro zone periphery countries, which are also carrying a legacy of pre-crisis CA imbalances, has been gradual with difficulties bringing back growth. This paper is an empirical investigation of current account adjustment in Europe with a focus on these two groups, looking at contributions from cyclical and other factors, and seeking to draw policy conclusions.
Keywords:
WP; deficit; EZ periphery; EU accession; CA adjustment; Current Account adjustment; Rebalancing; Competitiveness; Euro Zone Periphery; CA deficit; CA balance; Capital inflows; Exchange rate arrangements; Credit; Current account; Europe; Baltics
Cover IMF Working Papers
Export Performance in Europe: What Do We Know from Supply Links?
Jesmin Rahman
and
Mr. Tianli Zhao
One of the most important recent developments in international trade is the increasing interconnectedness of export production through a vertical trading chain network that streches across many countries, with each country specializing in particular stages of a good’s production. Using value added trade statistics, this paper tries to dissect and reshape understanding of European exports: where exports values are created, the role of vertical supply links in export growth, what is contributing to the growth in supply links, and how comparative advantages of countries are affected by supply links over time. Our analysis finds strong role of supply links in cross-country export performance in Europe, where these links between countries grew based on physical proximity, cost differential and similarity in export structure.
Keywords:
WP; VA export; Vertical Integration; Supply Link; Value Added; Comparative Advantage; export supply network; export orientation; export performance; Exports; Export performance; Manufacturing; Service exports; Europe