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.

The impact of unstable aids on consumption volatility in developing countries

In recent years, a large and expanding literature has examined the properties of developing economies with regard to the macroeconomic cycle.1 One such property that is characteristic of developing economies is large fluctuations in consumption. Meanwhile, aid for the low income countries is extremely volatile, and under certain circumstances, the volatile aid amplifies the consumption volatility. This document examines whether it is possible that the volatile aid yields high consumption volatility in African countries that constitute the majority of the low income countries. Our numerical analysis reveals that the strongly influential aid disbursements yield a considerably large fluctuation in consumption.

Economic voting and electoral volatility in Turkish provinces

Two groups of questions were addressed in this paper: (1) Is voter punishment of the incumbent the primary factor in electoral volatility? Are there any other types of vote swings that underlie volatility? (2) In general, does a decline in economic growth destabilize voter behavior? If so, what kinds of vote swings does an economic downturn tend to generate? Provincial-level panel data analysis yielded the following results: (1) Changes in volatility is primarily due to vote swings from the incumbent to the opposition and also to and from left-wing and right-wing parties. (2) Lower economic growth increases electoral volatility. Economic decline induces vote swings not only from the government to the opposition but also from left-wing to right-wing parties. This is probably because right-wing parties seem more concerned with economic issues and are thus more popular than left-wing parties with lower-income voters.

Skill sorting, inter-industry skill wage premium, and production chains: evidence from India 1999-2000

This paper proposes a mechanism that links industry’s technological characteristics (i.e. quality of non-labor inputs, which is proxied by the length of industry production chains), industry-specific skill wage premium, and skill sorting across industries. It is hypothesized that high-skilled workers are sorted into industries where they can receive a higher skill wage premium, by working with better quality non-labor input. The quality of non-labor inputs is assumed to be worse in industries with longer production chains due to the increased involvement of low-skilled labor and poor infrastructure over the sequential production. By examining Indian wage and employment data for 1999-2000, empirical evidence to support this mechanism can be obtained: First, the skill wage premium is lower [higher] in industries with longer [shorter] production chains. Second, the skill wage premium is lower [higher] in industries with a higher [lower] proportion of low-skilled workers producing inputs outside their own industry. Third, the proportion of high-skilled workers is larger in industries with shorter production chains and lower ratio of low-skilled labor involved, i.e., a skill sorting trend can be observed.

Is there any premium for unobservable quality? : a hedonic price analysis of the Malagasy rice market

This paper examines if consumers pay a premium for unobservable quality in the absence of quality standards and/or quality grading systems and, if so, how they assess that unobservable quality, using a rice retail market in Madagascar as an example. In Madagascar, the lack of quality standards and/or grading systems for rice makes is considered to be one of the causes of the rice market's spatial disintegration. Thus, quality standards and grading systems will be necessary to increase the market's efficiency. We hypothesize that consumers and retailers use product origin and rice name as observable indictors of unobservable quality and test the hypothesis using hedonic price regressions. We find that the interaction terms of product origin and rice name significantly affect the price after controlling for both observable quality and spatial and temporal price variation, but that the contribution of product origin and rice name to rice price variation is smaller than spatial and temporal factors. We thus conclude that consumers pay a premium for unobservable quality throughout Madagascar. This finding implies that quality standards and/or grading systems will work in the Malagasy market and that improving market infrastructure such as roads and storage will make them even more effective.