Comparing the Networks of Ethnic Japanese and Ethnic Chinese in International Trade

In this paper I re-examined the trade enhancing effects of ethnic Chinese networks, found by Rauch and Trindade (2002), on a newer and extended data set. The effects are estimated by the gravity equation with the product of the population ratio (or absolute number) of the ethnic Chinese in both the importing and exporting countries, and are reaffirmed positive and statistically significant. I also compared the effects of two different ethnic Japanese networks, i.e., the networks of long-term Japanese stayers in foreign countries, and the networks of permanent Japanese residents in foreign countries. It is found that the former has stronger trade enhancing effects than the latter. This shows that the effects of ethnic networks on international trade can be generalized beyond the ethnic Chinese, and the ’cohesiveness’ of the ethnic network matters to the trade enhancing effects of the network.

The Effect of Exchange Rate Volatility on International Trade: The Implication for Production Networks in East Asia

This paper is an empirical investigation of the relationship between exchange rate volatility and international trade, focusing on East Asia. It finds that intra-East Asian trade is discouraged by exchange rate volatility more seriously than trade in other regions because intermediate goods trade in production networks, which is quite sensitive to exchange rate volatility compared with other types of trade, occupies a significant fraction of trade. In addition, this negative effect of volatility is mainly induced by the unanticipated volatility and has an even greater impact than that of tariffs.

Analysis on International Trade of CLM Countries

Since their accession to AFTA, trade volumes of CLM countries have being grown rapidly while their trade patterns and directions have significantly changed. Recognizing the importance of international trade in CLM economies, this study attempts to analyze the trade patterns of CLM countries based the gravity model. The empirical analysis is conducted to identify the determining factors of each country’s bilateral trade flows and policy implications for promoting their trade.

Are trading partners complementary in international trade?

We use a unique dataset on trading transactions at the firm level to investigate a complementary effect in international transactions between sellers and buyers; trading transactions are more likely to be international when both sellers and buyers are large in size than when either sellers or buyers are large. Our econometric analysis provides evidence for the complementary effect between trading partners on the likelihood of international trade, which is most prominent for exports from North to South.

Bilateral tariff rates in international trade : finished goods versus intermediate goods

In this paper, we examined back-and-forth international transactions through tariff reduction by estimating modified gravity equations for finished goods and intermediate goods separately. Our main findings are as follows. Exports of finished machinery products are negatively associated with not only the importer's tariff rates on finished machinery products but also the exporter's tariff rates on machinery parts. Similarly, exports of machinery parts are negatively associated with not only the importer's tariff rates on machinery parts but also the exporter's tariff rates on finished machinery products. These results imply that tariff reduction in only one production process in an industry has the potential to drastically change the magnitude of trade in the whole industry.

Non-conventional provisions in regional trade agreements : do they enhance international trade?

The scope of recent regional trade agreements (RTAs) is becoming much wider in terms of including several provisions such as competition policy or intellectual property. This paper empirically examines how far advanced, non-conventional provisions in RTAs increase trade values among RTA member countries, by estimating the gravity equation with more disaggregated indicators for RTAs. As a result, we find that the provision on competition policy has the largest impacts on trade values, following that on government procurement. Our further analysis reveals that the more significant roles of these two provisions can be also observed in the impacts on the intensive and extensive margins.

The effect of EU environmental regulation on international trade : restriction of hazardous substance as a trade barrier

In 2003 the Restriction of Hazardous Substances (RoHS) was established in the EU, which limited the trade of machinery, electrical and electronic equipment that have at least one of the substances considered hazardous under RoHS directive. Since countries trading with the EU must comply with this new regulation, it is expected a decrease in value of imports to the EU. In this paper, it is followed the procedures used in Heckman (1979), as well as the extended procedure suggested by Helpman, Melitz, and Rubinstein (2008) to ascertain the effects on the persistence of trade and values of trade.

Parameterization of applied general equilibrium models with flexible trade specifications based on the Armington, Krugman, and Melitz models

This paper explains how the Armington-Krugman-Melitz supermodel developed by Dixon and Rimmer can be parameterized, and demonstrates that only two kinds of additional information are required in order to extend a standard trade model to include Melitz-type monopolistic competition and heterogeneous firms. Further, it is shown how specifying too much additional information leads to violations of the model constraints, necessitating adjustment and reconciliation of the data. Once a Melitz-type model is parameterized, a Krugman-type model can also be parameterized using the calibrated values in the Melitz-type model without any additional data. Sample code for the General Algebraic Modeling System (GAMS) has also been prepared to promote the innovative supermodel in the AGE community.

Compilation, application and challenge of IDE-JETRO's International Input-Output tables

International input-output tables are among the most useful tools for economic analysis. Since these tables provide detailed information about international production networks, they have recently attracted considerable attention in research on spatial economics, global value chains, and issues relating to trade in value-added. The Institute of Developing Economies at the Japan External Trade Organization (IDE-JETRO) has more than 40 years of experience in the construction and analysis of international input-output tables. This paper explains the development of IDE-JETRO’s multi-regional input-output projects including the construction of the Asian International Input-Output table and the Transnational Interregional Input-Output table between China and Japan. To help users understand the features of the tables, this paper also gives examples of their application.

How do free trade agreements reduce tariff rates and non-tariff barriers?

This paper empirically investigates how far free trade agreements (FTAs) successfully lower tariff rates and non-tariff barriers (NTBs) for manufacturing industries by employing the bilateral tariff and NTB data in a time series for countries around the world. We find that FTAs under GATT Article XXIV and the Enabling Clause contribute to reducing tariff rates by 2.1% points and 1.5% points, respectively. In the case of NTBs, their respective impacts are 6.6% points and 5.7% points. Membership in the World Trade Organization (WTO) does not contribute greatly to reducing tariff rates but does play a significant role in reducing NTBs. These results provide important implications for the literature on numerical assessments of FTAs.

On the stability of intra-industry trade

This paper presents the novel finding that two-way intra-industry trade (IIT) in product–country pairs is very unstable over time by using disaggregated trade data of OECD countries. Many products frequently switch among two-way, one-way and zero trade over time. To measure the stability of two-way trade, we propose a measure that we refer to as the "IIT stability index". Our estimation results using the proposed measure show that two-way trade involving markets of different sizes and long distance are likely to be unstable. In addition, primary products are more unstable than manufactured products.

Domestic and international border effects

Previous studies in the border-effect literature surprisingly found that domestic border effects are larger than international border effects (e.g., in the United States or Brazil). One interpretation of this result is that these estimates include the effects of producer agglomeration. Therefore, in this study, we estimate those border effects exclusively for transactions for final consumption, in which such agglomeration forces will be weak, in China and Japan. As a result, we found larger international border effects and could not find a significant role for producer agglomeration in the estimates of border effects. We also found that China's accession to the World Trade Organization reduces border effects in trading between China and Japan but does not decrease domestic border effects.

A unified framework of trade in value added : physical, monetary, exchange rates, and GHG emissions

Koopman et al. (2014) developed a method to consistently decompose gross exports in value-added terms that accommodate infinite repercussions of international and inter-sector transactions. This provides a better understanding of trade in value added in global value chains than does the conventional gross exports method, which is affected by double-counting problems. However, the new framework is based on monetary input--output (IO) tables and cannot distinguish prices from quantities; thus, it is unable to consider financial adjustments through the exchange market. In this paper, we propose a framework based on a physical IO system, characterized by its linear programming equivalent that can clarify the various complexities relevant to the existing indicators and is proved to be consistent with Koopman's results when the physical decompositions are evaluated in monetary terms. While international monetary tables are typically described in current U.S. dollars, the physical framework can elucidate the impact of price adjustments through the exchange market. An iterative procedure to calculate the exchange rates is proposed, and we also show that the physical framework is also convenient for considering indicators associated with greenhouse gas (GHG) emissions.

The Role of Distance in Determining International Transport Costs: Evidence from Philippine Import Data

This paper presents an empirical investigation of the appropriateness of distance as a determinant of international transport costs by using Philippine import data. This study addresses three specific questions. First, does distance really matter in the determination of transport costs? Second, if distance is a significant factor, what is the magnitude of its impact? Third, does the impact of distance on transport costs vary by commodity? Results indicate that while distance is important in determining transport costs, using distance alone as the proxy of international transport costs is insufficient, and such use underestimates the impact of distance on international transport costs. Results also indicate that the impact of distance varies across commodity groups, but it is difficult to precisely determine the direction and the magnitude of this impact.

Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.