The Economic Impact of Globalization
Saturday, Jan. 6, 2018 10:15 AM - 12:15 PM
- Chair: Maurice Obstfeld, International Monetary Fund
Trade, Jobs, and Inequality
AbstractThis paper examines the impact of trade on employment and other labor market and social outcomes across countries and examines the conditions and policies that help spread the gains from trade more evenly throughout the population. The relationship between trade and social and labor market indicators such as inequality, employment, and wage premia is complex. At the aggregate level, we find that trade does not adversely affect the income distribution, even though trade creates relative winners and losers.
At the microeconomic level, we exploit a large global dataset to examine the impact of import competition on employment and wages of individual firms, as well as the firm, industry, and country factors that mitigate any negative impact of an import shock. We also trace the effect of import competition on exports and on a firm’s financial position and investment response, illustrating multifaceted channels by which import competition influences decisions on employment and wages, many of which offset any adverse consequences of the shock.
Global Macro-Financial Cycles and Spillovers
AbstractWe develop a new dynamic factor model that allows us to jointly characterize global macroeconomic and financial cycles and the spillovers between them. The model decomposes macroeconomic cycles into the part driven by global and country-specific macro factors and the part driven by spillovers from financial variables. We consider cycles in macroeconomic aggregates(output, consumption, and investment) and financial variables (equity and house prices, interest rates,and credit). Our estimations indicate that while the global macro factor plays a major role in explaining G-7 business cycles, there are also sizeable spillovers from shocks to equity and house prices onto macroeconomic aggregates. These spillovers operate mainly through the global macro factor rather than the country-specific macro factors and are stronger in the period leading up to and following the global financial crisis. We find little evidence of spillovers from macroeconomic cycles to financial cycles.
Shock Transmission through Cross-Border Bank Lending: Credit and Real Effects
AbstractWe study the transmission of financial shocks across borders through international bank connections. Using data on cross-border interbank loans among 6,000 banks during 1997-2012, we estimate the effect of banks' direct and indirect exposures to banks in countries experiencing systemic banking crises ("crisis exposures") on profitability, credit, and the performance of borrower firms. We show that direct crisis exposures reduce bank returns and tighten credit conditions through lower loan volumes and higher rates on new loans. Indirect crisis exposures amplify these effects. Crisis exposures reduce firm growth and investment even in countries not experiencing banking crises themselves, thus transmitting shocks across borders.
Federal Reserve Bank of New York
Carnegie Mellon University
- F6 - Economic Impacts of Globalization
- F4 - Macroeconomic Aspects of International Trade and Finance