The effect of preferential trade agreements (PTAs) on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical PTA literature. ...The existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the 'correct' set of explanatory variables that ought to be included in the analysis. To account for the model uncertainty that surrounds the validity of the competing PTA theories, we introduce Bayesian model averaging (BMA) to the PTA literature. Statistical theory shows that BMA successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error, and by generating predictive distributions with optimal predictive performance. Once model uncertainty is addressed as part of the empirical strategy, we find strong evidence of trade creation, trade diversion, and open bloc effects. Our results are robust to a range of alternative empirical specifications proposed by the recent PTA literature.
We construct comprehensive public sector balance sheets for Finland for 2000–2016 by complementing general government statistics with data on public corporations and pensions. These static balance ...sheets show that Finland’s public sector net worth at end 2016 was −160 percent of GDP, after having registered considerable fluctuations previously, including due to asset holdings’ sensitivity to equity valuations. We then expand the analysis to an intertemporal balance sheet by adding present value estimates of future fiscal flows. This allows performing fiscal stress tests and policy experiments. These suggest that Finland’s public finances will remain sound if ongoing reform efforts to address aging pressures yield their expected savings. Under this assumption, intertemporal financial net worth (IFNW) of the public sector would exceed 50 percent of GDP – well within the 30–85 percent of GDP range derived in stress tests as the needed buffer to maintain positive IFNW in light of a severe shock.
We demonstrate that durable MFN tariff elimination affects trade patterns through several layers, and magnitudes of effects are sizable. The WTO Information Technology Agreement's (ITA) unique ...setting allows us to overcome the challenges associated with identifying effects of non-discriminatory trade policies due to two reasons: (i) ITA constitutes a quasi-natural experiment of several “passive” signatories joining the agreement as an unavoidable part of pursuing a larger policy objective, and (ii) ITA's partial coverage of the IT sector provides a natural control group for identification based on cross-product variation. Our analysis finds novel nonlinear impacts of tariff liberalization: Complete tariff elimination results in large additional trade gains – over and above tariff reductions – especially for intermediate goods. The commitment to durable tariff elimination, through WTO bindings, adds another two layers, boosting both imports and exports more than equivalent unilateral reforms. This commitment spurned development of a downstream IT export sector in “passive” signatories.
Norway's public sector balance sheet Cabezon, Ezequiel; Henn, Christian
Applied economics letters,
06/2020, Letnik:
27, Številka:
11
Journal Article
Recenzirano
An intertemporal public sector balance sheet is the most comprehensive way to evaluate long-term fiscal sustainability. But data constraints imply that it is still seldomly used. In this article, we ...illustrate the considerable value added of such an analysis over standard debt sustainability analyses, using the example of Norway and find surprising results: The immense wealth in its oil fund is insufficient to address future aging pressures, including because nonoil fiscal deficits have already grown large.
The literature measuring the effects of WTO membership on trade flows has produced remarkably diverse results. Rose (2004) reports a wide range of empirical specifications that produce no WTO ...effects. Tomz et al. (2007) use Rose's data but include
de facto WTO membership, to find positive WTO trade effects. Rose (2005) also produced positive WTO trade effects after accounting for the diverse trade effects produced by individual preferential trade agreements (PTAs). When Subramanian and Wei (2007) emphasize general equilibrium trade effects by controlling for multilateral resistance, they find strong WTO trade effects only for industrialized countries. Subramanian and Wei (2007), however, account neither for unobserved heterogeneity among trading partners, nor for differences in trade effects across PTAs (which could inflate WTO estimates). We unify the Rose, Tomz et al., and Subramanian and Wei specifications in one comprehensive approach that minimizes omitted variable bias to show that all specifications produce one consistent result: WTO effects on trade flows are not statistically significant, while PTAs produce strong but uneven trade effects. Extending the gravity model to address specific avenues in which WTO may have affected trade flows, we find that WTO membership boosts trade prior to PTA formation and increases trade among proximate developing countries (at the expense of distant trade). An augmented gravity model that accounts for WTO terms-of-trade theory shows that countries with greater incentives to bargain for tariff reductions before WTO accession experience positive and significant subsequent WTO trade effects.
This paper investigates how new discriminatory measures implemented since the start of the global financial crisis are affecting global trade flows. Newly available data on border measures and ...behind-the-border measures (for example, bailouts and subsidies) implemented through April 2010 are matched to monthly 4-digit bilateral trade data using a first-differenced gravity equation. The estimation strategy exploits within-product variation and utilizes extensive time-varying fixed effects and duad/tetrad ratio estimation to isolate asfar as possible the impact of protectionist measures from that of other factors to estimate trade policy impacts. The estimates suggest that trade in country pairs subject to new border measures decreased by 5-8 percent relative to trade in the same product among pairs not subject to new measures. Identification of trade impacts of behind-the-border measures proves to be considerably more challenging, but, also for these measures, evidence points toward a negative impact, possibly of roughly the same magnitude. These results imply a decline in global trade of about 0.2 percent on account of crisis protectionism.
The introduction of the euro generated substantial interest in measuring the impact of currency unions (CUs) on trade flows. Rose's (2000) initial estimates suggested a tripling of trade and created ...a literature in search of "more reasonable" CU effects. A recent meta-analysis of this literature shows that subsequent papers quantify CU trade impacts at 30-90 percent. However, most recent studies use shorter time series and fewer countries than Rose in his original work. We revisit Rose's original benchmark, extend the dataset, and address Baldwin's (2006) critiques regarding the proper specification of gravity models in large panels by simultaneously accounting for multilateral resistance and unobserved bilateral heterogeneity. This produces a robust average CU trade effect of 45 percent. Yet, the trade impacts of individual CUs vary substantially and are generally lower than those of preferential trade agreements (PTAs). Our revised benchmark can be used as a yardstick for future studies to delineate how estimates differ due to new data or differences in econometric specifications.
This paper develops new estimates of export quality, based on bilateral data, which are far more extensive than previous efforts. The data cover 166 countries and more than 800 products over the ...period 1962–2014. The analysis finds that, within any given product line, export quality on average converges rapidly across countries. However, there is also significant cross-country heterogeneity in the growth rate of quality. Institutional quality, liberal trade policies, foreign direct investment inflows, and human capital all promote quality upgrading, although their impacts vary across sectors.
The literature measuring the impact of Preferential Trade Agreements (PTA) and WTO membership on trade flows has produced remarkably diverse results. Rose's (2004) seminal paper reports a range of ...specifications that show no WTO effects, but Subramanian and Wei (2007) contend that he does not fully control for multilateral resistance (which could bias WTO estimates). Subramanian and Wei (2007) address multilateral resistance comprehensively to report strong WTO trade effects for industrialized countries but do not account for unobserved bilateral heterogeneity (which could inflate WTO estimates). We unify these two approaches by accounting for both multilateral resistance and unobserved bilateral heterogeneity, while also allowing for individual trade effects of PTAs. WTO effects vanish and remain insignificant throughout once multilateral resistance, unobserved bilateral heterogeneity, and individual PTA effects are introduced. The result is robust to the use of alternative definitions and coding conventions for WTO membership that have been employed by Rose (2004), Tomz et al. (2007), or by Subramanian and Wei's (2007).
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