Journal of International Commerce, Economics and Policy

Asia and China made disproportionate contributions to the slowdown of global trade growth in 2015. China’s import growth slowed starkly, driven by both external and domestic factors, including a rebalancing of demand. Econometric results point to weak investment and rebalancing as the main causes of the import slowdown. Spillover effects from China’s rebalancing are estimated for some 60 countries using value-added trade data, and are found to be more negative on Asia and commodity exporters than others.

This paper reviews the main issues related to the short-term impact of structural reforms in different macroeconomic contexts and takes stock of existing theoretical and empirical studies. Taking reforms introduced in “normal” times as a benchmark, it reviews the available evidence on the impact of reforms that are implemented in “bad” times — defined as the presence of a sizeable negative output gap and persistently weak demand — as well as under different assumptions regarding the availability or effectiveness of macroeconomic policies in supporting the reforms. In doing so, the paper focuses on the key channels through which different reforms influence short-term activity via the main components of demand and discusses how these channels operate under different macro conditions.

Benign financing conditions since the global financial crisis and, more recently, rising financing needs have fueled a rapid increase in credit to the nonfinancial private sector, especially to the corporate sector in emerging markets and developing economies (EMDEs). In this paper, we first compare post-crisis credit booms with pre-crisis episodes of credit booms and document some distinctive features of post-crisis credit booms. We find that, credit booms in commodity-importing EMDEs in the immediate wake of the global financial crisis have subsided since 2012 but have left a legacy of credit to the nonfinancial private sector that has been considerably higher than in previous credit booms. In contrast, since 2014, credit growth in several commodity-exporting EMDEs has been near the pace observed in past credit booms. We then benchmark current credit-to-gross domestic product (GDP) ratios against thresholds identified in the literature as early warning indicators. Most EMDEs are still some distance away from those thresholds. However, since recent credit booms have not been accompanied by investment surges/booms, GDP growth may contract more when credit booms unwind.

Formal models of currency crises have shown that inconsistencies between countries' domestic and exchange rate policies are a major cause of currency crises. To understand why such prolonged inconsistencies exist, we need to go beyond standard economic models and take political economy and behavioral considerations into account. We sketch out ways in which such considerations can be taken into account and highlight recent research that is useful for this project. We also offer some directions for future research and a brief guide to the empirical identification of currency crises and to the measurements of some of the relevant political and economic policy variables.

This paper investigates two questions: first, how does countries' structural economic vulnerability (EVI) affect their foreign direct investment (FDI) inflows; second, how does EVI influence FDI inflows when host countries further liberalize their trade policies. The empirical analysis provides evidence that EVI influences negatively FDI inflows and that, in the context of greater trade policy liberalization, this vulnerability deters FDI only when it exceeds a certain threshold. These results call for enhanced cooperation between national governments and the international community to address developing countries, least-developed countries' EVI in order to ensure greater FDI inflows, which are critical for their economic development.

Global value chains (GVCs) have altered the nature of global trade and offer significant opportunities for developing countries to expand exports, access technology, and raise productivity. Recent literature has pointed to a range of underlying characteristics that may drive participation in GVCs. Using a modified factor-content methodology, this paper shows that proximity to markets, efficient logistics, and strength of institutions are among the most important capabilities. However, the paper also shows that each sector has a unique mix of capability requirements. The paper applies the methodology to Southern African Customs Union countries, and demonstrates that, by filling gaps in underlying capabilities, these countries could increase participation in certain GVC sectors.