Global Economy Journal

Using sequential structural break tests, we attempt to determine if and when a new GATT member experiences statistically significant changes in the paths of its trade with incumbent members. To test for the nature of a change, we compare the averages of the actual postbreak trade shares with the averages of the postbreak extrapolated trade shares. Should a significant structural break be detected, we compare the break year with the accession year of that country to GATT. Our results show that only a small fraction of countries experience significant positive structural breaks in their trade shares. Furthermore, any significant positive breaks generally occur far before or after the time of a country's accession to GATT.

This paper estimates the effect of trade liberalization on import performance of selected Latin American countries (which account for about 85 per cent of total Latin America imports). The novelty of this study is that it applies a long-term approach covering the whole XX century using times series and panel data analyses. The empirical exercise shows that the relationship between (lower) tariffs and import growth in Latin America cannot be taken for granted, as it often happens in the literature, and whenever it exists, it is not always quantitatively substantial. In particular, our analysis shows the existence of a long run relationship between tariffs and imports only from the second half of the XX century. It follows that trade liberalization appears effective in fostering Latin America's trade growth only when integrated within a wider process, implying a multilateral and negotiated approach to trade policy. In this sense, multilateral and regional agreements appear to have played a key role not only through tariff reduction but remarkably thanks to the creation of a rule-based system governing global trade relations, through which uncertainty was reduced and the spread of best practices promoted. This result would confirm the thesis of those who endorse the existence of a formalized trading system to guarantee tariff liberalization and foster trade growth.

This study aims to contribute to drawing a more complete picture of the role of multilateral economic and political institutions. Particularly, we pursue answers to questions such as how much influence participation in multilateral trade arrangements and military alliance has on bilateral trade of the states involved. Our results show that political institutions, set apart from trade issues, do affect bilateral trade--even though these effects are demonstrably smaller than those that occur within economic institutions. Military disputes between two states are sure to decrease bilateral trade, while joint democracy and policy similarity between two states, although moderate, increase bilateral trade, but military alliance is indeterminate.

The present crisis is too raw to have a catchy title, but while previous work of members of the International Trade and Finance Association and readers of the Global Economy Journal already helps us understand it, I anticipate many future contributions to the GEJ on the subject as well.

The world of international finance is in the process of transformation. A new group of emerging market economies and members of GCC are emerging as major exporters of capital. Sovereign Wealth Funds (SWFs) are their instruments of interacting with the global capital markets. Although they are an instrument of enhancing liquidity and financial resource allocation in the international capital market, they have become a source of controversies and threaten an escalation in financial protectionism. SWFs are state-owned and managed and have started playing a decisive role in underpinning, sustaining, and expanding financial globalization. Popular and financial media did not begin copious discussions regarding the operations of the SWF until the last quarter of 2007, when they acquired considerable eminence due to their increasing operations. The sub-prime mortgage crisis in the US created severe credit crunch, which precipitously worsened to a crisis proportion in the third week of September 2008. This credit crunch became a window of opportunity for the SWFs. Total assets under management of the SWFs were on an increase. However, their state-ownership and lack of transparency has created considerable anxiety about their operations. The SWFs are being viewed as turning from creditors to owners.

Large and diversified portfolio investments by SWFs entail few risks for the international financial market; anxiety about them is exaggerated. Restrictions from host economies on SWFs activities would deprive the international financial markets of a cash-rich market player. Rise of financial protectionism would work as a barricade against the expanding globalization. Participation of the SWF in the international financial system can be improved by policy initiatives at three levels, namely, the SWF level, the host economy level and by the international institutions like the IMF, which needs to devise a set of best practices for the operations of the SWFs.

This study finds that there is evidence of a J-curve for Chile, Ecuador, and Uruguay and lack of support for a J-curve for Argentina, Brazil, Colombia, and Peru. Increased real income in the home country would improve the trade balance for Brazil and Ecuador and deteriorate the trade balance for Argentina, Chile, Colombia, Peru, and Uruguay. Increased real income in the U.S. would improve the trade balance for Argentina, Chile, Colombia, Peru, and Uruguay and deteriorate the trade balance for Brazil and Ecuador. Hence, the conventional wisdom to pursue real depreciation to improve the trade balance may not apply to some of these countries.

Most industrialized and industrializing countries of the world were highly nervous about the spread effect of the surge of investment, industrialization and economic growth in China during early years of the 2000s. They were anxiously searching for ways and means to protect their economic interests from this effect. To describe this phenomenon eloquently the mass media used the term `China factor in world trade.' Against this backdrop the Japan-Malaysia free trade agreement (FTA) under an economic partnership agreement was signed in 2005 and implemented from 2006 with the expectation that it would be able to protect their bilateral trade from the sharp edge of the China factor and further enhance trade and investment relationships between the two countries. This study examines its effectiveness in influencing their bilateral trade growth in the face of this so called China factor. From analyses of the time series data on Malaysia's trade during 1986-2007 it is observed that the bilateral trade between Malaysia and Japan became stagnant during 2001-2005 with an average annual value of US$25.35 billion as a result of the impact of the China factor. However, during 2006-2007, the initial two years of its operation, the FTA was able to minimize the impacts of the China factor and revamp the growth of the bilateral trade at a modest rate. It is projected that their bilateral trade will grow marginally and reach to US$50.34 billion in 2010; but the growth rate will start declining from that year. This, in effect, indicates that the China factor's massive impact has blunted the sharp-edge of the Japan-Malaysia FTA's`tactical merit' for promoting bilateral trade growth. As a result, it is found to have only a modest and short lived influence on bilateral trade growth in the presence of China's increasing involvement in Malaysia's industrial growth. However, for a more reliable assessment a longer experience of FTA will be required.