Liberty Street Economics
Return to Liberty Street Economics Home Page

39 posts on "International Economics"

July 14, 2014

High Unemployment and Disinflation in the Euro Area Periphery Countries

Thomas Klitgaard and Richard Peck

Economists often model inflation as dependent on inflation expectations and the level of economic slack, with changes in expectations or slack leading to changes in the inflation rate. The global slowdown and the subsequent sovereign debt crisis caused the greatest divergence in unemployment rates among euro area member countries since the monetary union was founded in 1999. The pronounced differences in economic performances of euro area countries since 2008 should have led to significant differences in price behavior. That turned out to be the case, with a strong correlation evident between disinflation and labor market deterioration in euro area countries.

Continue reading "High Unemployment and Disinflation in the Euro Area Periphery Countries" »

Posted by Blog Author at 7:00 AM in International Economics, Macroecon | Permalink | Comments (0)

July 07, 2014

Why Hasn't the Yen Depreciation Spurred Japanese Exports?

Mary Amiti, Oleg Itskhoki, and Jozef Konings

The Japanese yen depreciated 30 percent from its peak in the fourth quarter of 2011 against its trading partners. This was expected to boost its exports as the lower yen makes Japanese goods more competitive on global markets. Instead, the volume of Japanese exports of goods actually fell by 0.6 percent over this same period, as can be seen in the chart below. Weaker external demand surely contributed to this poor export performance. Yet over the same period, U.S. goods exports grew by more than 6 percent, which suggests that other factors are also at play. In this post, we draw on our recent paper “Importers, Exporters, and Exchange Rate Disconnect” that highlights another channel to help explain these puzzling developments. In that study, we show that a key to understanding why there is low pass-through from exchange rates into export prices is that large exporters are also large importers, so they face offsetting exchange rate effects on their marginal costs. In the case of Japan, the connection between the yen and production costs has been made stronger since the country replaced nuclear power with imported fuels in the aftermath of the 2011 earthquake.

Continue reading "Why Hasn't the Yen Depreciation Spurred Japanese Exports?" »

Posted by Blog Author at 7:00 AM in International Economics | Permalink | Comments (2)

May 21, 2014

Why U.S. Exporters Use Letters of Credit

Friederike Niepmann and Tim Schmidt-Eisenlohr

This post is the second of two Liberty Street Economics posts on trade finance.

Banks play a critical role in international trade by offering letters of credit (LCs) that substantially reduce the risk faced by exporters. As we discuss in our recent New York Fed staff report, the use of LCs by U.S. exporters has been on an upward trend in recent years. Two reasons for this may be that firms rely more heavily on LCs in financing export sales when interest rates are low and when uncertainty in global markets is high. Furthermore, the use of LCs differs across countries. Specifically, LCs largely support exports to countries with intermediate levels of risk. This is likely because the fees for exports to higher-risk countries eventually become too substantial.

Continue reading "Why U.S. Exporters Use Letters of Credit" »

Posted by Blog Author at 7:00 AM in Financial Institutions, International Economics | Permalink | Comments (2)

May 19, 2014

The Trade Finance Business of U.S. Banks

Friederike Niepmann and Tim Schmidt-Eisenlohr

This post is the first of two Liberty Street Economics posts on trade finance.

Banks facilitate international trade by providing financing and guarantees to importers and exporters. This is a big business for U.S. banks, but it has been difficult to estimate exactly how big due to a lack of data. In our recent New York Fed staff report, we shed some light on the size and structure of this market using information on banks’ trade finance claims available internally at the New York Fed. This post, the first of two, shows how trade finance has become more important in recent years, particularly with firms exporting to Asia. It also reveals that the size of the trade finance business varies widely across countries, with distance and shipping times from the United States being important factors. The second post will look at how trade finance is tied to country risk.

Continue reading "The Trade Finance Business of U.S. Banks" »

Posted by Blog Author at 7:00 AM in Financial Institutions, International Economics | Permalink | Comments (0)

May 16, 2014

Will the United States Benefit from the Trans-Pacific Partnership?

Mary Amiti and Benjamin Mandel

U.S. involvement in what could be one of the world’s largest free trade agreements, the Trans-Pacific Partnership (TPP), has garnered a lot of attention, especially since the entry of Japan into negotiations last year. The proposed free trade agreement (FTA) encompasses twelve countries, which combined account for 45 percent of U.S. exports and 37 percent of U.S. imports. This broad coverage of U.S. trade seems to suggest large potential gains for the U.S. from the agreement. However, three quarters of this trade is already within the U.S. free trade agreement with Canada and Mexico (the North American Free Trade Agreement (NAFTA)), making the assessment of potential gains to the TPP less clear cut. In this post, we investigate some implications of TPP for U.S. international trade, with a focus on identifying areas with the greatest potential for liberalization and, hence, benefits to U.S. exporters and consumers.

Continue reading "Will the United States Benefit from the Trans-Pacific Partnership?" »

Posted by Blog Author at 7:00 AM in International Economics | Permalink | Comments (0)

March 31, 2014

Measuring Global Bank Complexity

Nicola Cetorelli, Linda Goldberg, and Arun Gupta

This post is the seventh in a series of thirteen Liberty Street Economics posts on Large and Complex Banks. For more on this topic, see this special issue of the Economic Policy Review.

Paraphrasing a famous Supreme Court opinion: “I know bank complexity when I see it.” This expression probably speaks to the truth that, if we look at a given banking organization, we ought to be able to state whether it is more or less “complex.” And yet, such an approach hardly offers any guidance if one wants to understand the intricacies of global banks and to monitor and regulate them. What should be the appropriate metrics? It seems to us that there is not a consensus just yet on what complexity might mean in the context of banking. The global dimension of a bank adds many layers, so focusing on global banks is bound to yield a more comprehensive take on the issue than examining purely domestic banking entities. Therefore, in this piece, we view complexity through the lens of the operations of global banks.

Continue reading "Measuring Global Bank Complexity" »

Posted by Blog Author at 7:00 AM in Financial Markets, International Economics | Permalink | Comments (0)

March 05, 2014

Risk Aversion, Global Asset Prices, and Fed Tightening Signals

Jan Groen and Richard Peck

The global sell-off last May of emerging market equities and currencies of countries with high interest rates (“carry-trade” currencies) has been attributed to changes in the outlook for U.S. monetary policy, since the sell-off took place immediately following Chairman Bernanke’s May 22 comments concerning the future of the Fed’s asset purchase programs. In this post, we look back at global asset market developments over the past summer, and measure how changes in global risk aversion affected the values of carry-trade currencies and emerging market equities between May and September of last year. We find that the initial signal of a possible change in U.S. monetary policy coincided with an increase in global risk aversion, which put downward pressure on global asset prices.

Continue reading "Risk Aversion, Global Asset Prices, and Fed Tightening Signals " »

February 20, 2014

Just Released: The Inflation Outlook in the Euro Zone . . . Survey Says

Robert Rich, Kaivan K. Sattar, and Joseph Tracy

The European Central Bank (ECB) released its 2014:Q1 Survey of Professional Forecasters (SPF) on February 13. The release comes at a time of growing concern about low Euro-zone inflation: consumer prices were up only 0.7 percent over the year in January, the fourth consecutive monthly reading of less than 1 percent and well below the ECB’s target of just below 2 percent. Some commentators have argued that falling inflation after five years of recession or very slow growth has raised the threat of deflation.

Continue reading "Just Released: The Inflation Outlook in the Euro Zone . . . Survey Says" »

Posted by Blog Author at 7:00 AM in International Economics, Macroecon | Permalink | Comments (0)

February 05, 2014

Comparing U.S. and Euro Area Unemployment Rates

Thomas Klitgaard and Richard Peck

Euro area growth has been stalled since 2010, mired in the sovereign debt crisis, while the United States has managed a slow but steady recovery following the Great Recession. Euro area and U.S. labor markets reflect these differing growth paths. While unemployment rates in the euro area and the United States were both around 10 percent in 2010, the unemployment rate in the euro area has since increased to 12.0 percent, and the U.S. rate has fallen to 6.7 percent. However, the outperformance of the U.S. labor market as measured by unemployment rates is overstated. Employment relative to the population has declined in the euro area, but the divergence of this measure from that of the United States is more modest than suggested by unemployment rates. The difference is that, unlike in the United States, the share of women in the euro area labor force is increasing, and that development accounts for roughly half of the current gap between unemployment rates in the two economies.

Continue reading "Comparing U.S. and Euro Area Unemployment Rates" »

Posted by Blog Author at 7:00 AM in International Economics, Labor Economics | Permalink | Comments (0)

November 18, 2013

Yen and Yang: The Response of the Nikkei to the Yen

Andrew Howland and Benjamin Mandel

To what extent are Japanese equities driven by changes in the value of the yen? This question is especially relevant for recent developments in Japan, where both the Nikkei equity index and the dollar value of the yen appear to have reacted strongly to new policy initiatives that were introduced in late 2012 (that is, the fiscal and monetary policy changes collectively referred to as “Abenomics”). In this post, we use a particular statistical technique to compute how much of the post-Abenomics Nikkei reaction can be ascribed to changes in the foreign exchange rate. Our estimates imply that roughly half of the recent movements in the Nikkei can be ascribed to the changing value of the yen, with the remainder reflecting the domestic implications of Abenomics and other factors.

Continue reading "Yen and Yang: The Response of the Nikkei to the Yen" »

Posted by Blog Author at 7:00 AM in International Economics, Macroecon | Permalink | Comments (2)
About the Blog
Liberty Street Economics features insight and analysis from economists working at the intersection of research and Fed policymaking.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Upcoming Posts
Useful Links
Feedback & Custom Guidelines
Liberty Street Economics invites you to comment on a post.
Comment Guidelines
We encourage you to submit comments, queries and suggestions on our blog entries. We will post them below the entry, subject to the following guidelines:
Please be brief: Comments are limited to 1500 characters.
Please be quick: Comments submitted more than 1 week after the blog entry appears will not be posted.
Please try to submit before COB on Friday: Comments submitted after that will not be posted until Monday morning.
Please be on-topic and patient: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post. The moderator will not post comments that are abusive, harassing, or threatening; obscene or vulgar; or commercial in nature; as well as comments that constitute a personal attack.  We reserve the right not to post a comment; no notice will be given regarding whether a submission will or will not be posted.
Archives