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Begin New Search Topic International Trade and Finance Political Geography North America Content Type Working Paper Publishing Institution Board of Governors of the Federal Reserve System

1. Crisis and Calm: Demand for U.S. Currency at Home and Abroad From the Fall of the Berlin Wall to 2011

Author:
Ruth Judson
Publication Date:
11-2013
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
U.S. currency has long been a desirable store of value and medium of exchange in times and places where local currency or bank deposits are inferior in one or more respects. Indeed, as noted in earlier work, a substantial share of U.S. currency circulates outside the United States. Although precise measurements of stocks and flows of U.S. currency outside the United States are not available, a variety of data sources and methods have been developed to provide estimates. This paper reviews the raw data available for measuring international banknote flows and presents updates on indirect methods of estimating the stock of currency held abroad: the seasonal method and the biometric method. These methods require some adjustments, but they continue to indicate that a large share of U.S. currency is held abroad, especially in the $100 denomination. In addition to these existing indirect methods, I develop a framework and basic variants of a new method to estimate the share of U.S. currency held abroad. Although the methods and estimates are disparate, they provide support for several hypotheses regarding cross-border dollar stocks and flows. First, once a country or region begins using dollars, subsequent crises result in additional inflows: the dominant sources of international demand over the past decade and a half are the countries and regions that were known to be heavy dollar users in the early to mid-1990s. Second, economic stabilization and modernization appear to result in reversal of these inflows. Specifically, demand for U.S. currency was extremely strong through the 1990s, a period of turmoil for the former Soviet Union and for Argentina, two of the largest overseas users of U.S. currency. Demand eased in the early 2000s as conditions gradually stabilized and as financial institutions developed. However, this trend reversed sharply with the onset of the financial crisis in late 2008 and has continued since then.
Topic:
International Trade and Finance, Currency, Banking, and Economic Stability
Political Geography:
North America and United States of America

2. Trade Reforms, Foreign Competition, and Labor Market Adjustments in the U.S.

Author:
Illenin O. Kondo
Publication Date:
12-2013
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using data on trade-induced displacements, this paper documents that locations facing more foreign competition in the U.S. have: higher job destruction rates, lower job creation rates, and thereby lower employment rates. In contrast to standard trade theory, a model with variable markups and heterogeneous segmented labor markets is consistent with these facts. Foreign competition has a correlated effect on job destruction and job creation precisely because the most vulnerable locations also have lower productivity. Following an unexpected trade liberalization with limited mobility, employment sharply falls in the worse hit locations while welfare and employment increase in the aggregate.
Topic:
Foreign Exchange, International Trade and Finance, Reform, and Labor Market
Political Geography:
North America and United States of America

3. Nonlinearities in the Oil Price-Output Relationship

Author:
Lutz Kilian and Robert J. Vigfusson
Publication Date:
01-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
It is customary to suggest that the asymmetry in the transmission of oil price shocks to real output is well established. Much of the empirical work cited as being in support of asymmetries, however, has not directly tested the hypothesis of an asymmetric transmission of oil price innovations. Moreover, many of the papers quantifying these asymmetric responses are based on censored oil price VAR models which recently have been shown to be invalid. Other studies are based on dynamic correlations in the data that do not shed light on the central question of whether the structural responses of real output triggered by positive and negative oil price innovations are asymmetric. Recently, a number of new methodologies have been introduced and applied to the problem of testing and quantifying asymmetric responses of U.S. real economic activity to positive and negative oil price innovations. Our objective is to put this literature in perspective, to contrast it with more traditional approaches, to highlight directions for further research, and to reconcile some seemingly conflicting results reported in the literature.
Topic:
Economics, Energy Policy, International Trade and Finance, Oil, and Natural Resources
Political Geography:
North America and United States of America

4. Where are Global and U.S. Trade Heading in the Aftermath of the Trade Collapse: Issues and Alternative Scenarios

Author:
Joseph W. Gruber, Flippo di Mauro, Bernd Schnatz, and Nico Zorell
Publication Date:
03-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Global and U.S. trade declined dramatically in the wake of the global financial crisis in late 2008 and early 2009. The subsequent recovery in trade, while vigorous at first, gradually lost momentum in 2010. Against this backdrop, this paper explores the prospects for global and U.S. trade in the medium term. We develop a unified empirical framework – an error correction model – that exploits the cointegrating relationship between trade and economic activity. The model allows us to juxtapose several scenarios with different assumptions about the strength of GDP growth going forward and the relationship between trade and economic activity. Our analysis suggests that during the crisis both world trade and U.S. exports declined significantly more than would have been expected on the basis of historical relationships with economic activity. Moreover, this gap between actual and equilibrium trade is closing only slowly and could persist for some time to come.
Topic:
Economics, International Cooperation, International Trade and Finance, and Financial Crisis
Political Geography:
North America and United States of America

5. Forecasting the Price of Oil

Author:
Ron Alquist, Lutz Kilian, and Robert J. Vigfusson
Publication Date:
07-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting the price of oil? How useful are survey forecasts? How does one evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future demand and supply conditions? How does one quantify risks associated with oil price forecasts? Can joint forecasts of the price of oil and of U.S. real GDP growth be improved upon by allowing for asymmetries?
Topic:
Energy Policy, International Trade and Finance, Oil, and Natural Resources
Political Geography:
North America and United States of America

6. The Revealed Competitiveness of U.S. Exports

Author:
Massimo Del Gatto, Flippo de Mauro, Joseph W. Gruber, and Benjamin R. Mandel
Publication Date:
08-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The U.S. share of world merchandise exports has declined sharply over the last decade. Using data at the level of detailed industries, this paper analyzes the decline in U.S. share against the backdrop of alternative measures of the competitiveness of the U.S. economy. We document the following facts: (i) only a few industries contributed to the decline in any meaningful way, (ii) a large part of the drop was driven by the changing size of U.S. export industries and not the size of U.S. sales within those industries, (iii) in a gravity framework, the majority of the decline in the U.S. export share within industries was due to the declining U.S. share of world income, and (iv) in a computed structural measure of firm productivity, average U.S. export productivity has generally maintained its high level versus other countries over time. Overall, our analysis suggests that the dismal performance of the U.S. market share is not a sufficient statistic for competitiveness.
Topic:
Economics, International Trade and Finance, Hegemony, Finance, and Exports
Political Geography:
North America and United States of America

7. Oil Efficiency, Demand, and Prices: A Tale of Ups and Downs

Author:
Martin Bodenstein and Luca Guerrieri
Publication Date:
10-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The macroeconomic implications of oil price fluctuations vary according to their sources. Our estimated two-country DSGE model distinguishes between country-specific oil supply shocks, various domestic and foreign activity shocks, and oil efficiency shocks. Changes in foreign oil efficiency, modeled as factor-augmenting technology, were the key driver of fluctuations in oil prices between 1984 and 2008, but have modest effects on U.S. activity. A pickup in foreign activity played an important role in the 2003-2008 oil price runup. Beyond quantifying the responses of oil prices and economic activity, our model informs about the propagation mechanisms. We find evidence that nonoil trade linkages are an important transmission channel for shocks that affect oil prices. Conversely, nominal rigidities and monetary policy are not.
Topic:
Energy Policy, International Trade and Finance, Oil, and Natural Resources
Political Geography:
North America and United States of America

8. Escape from New York: The Market Impact of SEC Rule 12h-6

Author:
Nuno Fernandes, Uger Lel, and Darius P. Miller
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We examine the stock market impact of SEC Rule 12h-6 which eased the ability of foreign firms to deregister with the SEC and as a result terminate their U.S. disclosure obligations under the 1934 Securities Exchange Act. We document that the market reacted negatively to the ability of firms from weak disclosure and governance countries to more easily opt out of the stringent U.S. reporting and legal environment. Our findings suggest that shareholders of non-U.S firms place significant value on U.S. securities regulations, especially when the home country investor protections are weak.
Topic:
International Trade and Finance, Regulation, Legal Theory, and SEC
Political Geography:
United States and North America

9. Current Account Sustainability and Relative Reliability

Author:
Stephanie E. Curcuru and Charles P. Thomas
Publication Date:
09-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The sustainability of the large and persistent U.S. current account deficits is one of the biggest issues currently being confronted by international macroeconomists. Some very plausible theories suggest that the substantial global imbalances can continue in a benign manner, other equally plausible theories predict a disorderly resolution, and in general it is very difficult to discern between competing theories. To inform the debates, we view competing theories through the perspective of the relative reliability of the data the theories rely on. Our analysis of the dark matter theory is cursory; from a relative reliability perspective, it fails as it is built on the assumption that an item that is largely unmeasured is the most accurate component of the entire set of international accounts. Similarly, the best data currently available suggest that U.S. returns differentials are much smaller than implied by the exorbitant privilege theory. Our analysis opens up questions about potential inconsistencies in the international accounts, which we address by providing rough estimates of various holes in the accounts.
Topic:
International Trade and Finance, Markets, and Investment
Political Geography:
United States and North America

10. Breaks in the Variability and Co-Movement of G-7 Economic Growth

Author:
Jon Faust and Brian M. Doyle
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper investigates breaks in the variability and co-movement of output, consumption, and investment in the G-7 economies. In contrast with most other papers on co-movement, we test for changes in co-movement allowing for breaks in mean and variance. Despite claims that rising integration among these economies has increased output correlations among them, we find no clear evidence of an increase in correlation of growth rates of output, consumption, or investment. This finding is true even for the United States and Canada, which have seen a tremendous increase in bilateral trade shares, and for the members of the euro area in the G-7.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States, Canada, and North America