Journal of Risk and Financial Management

Research

23 pages, 2208 KiB

Open AccessArticle

A Primer on Rules of Origin as Non-Tariff Barriers

by Dzmitry Kniahin and Jaime de Melo

J. Risk Financial Manag. 2022, 15(7), 286; https://doi.org/10.3390/jrfm15070286 - 28 Jun 2022

Cited by 6 | Viewed by 5218

An explosion of different preferential rules of origin (PROO) has accompanied the spread of preferential trade agreements (PTAs) around the world. Complying with PROO requirements entail costs for producers, exporters, and customs officials. Observers, firms, customs officials, and policymakers have advocated simplification as [...] Read more.

An explosion of different preferential rules of origin (PROO) has accompanied the spread of preferential trade agreements (PTAs) around the world. Complying with PROO requirements entail costs for producers, exporters, and customs officials. Observers, firms, customs officials, and policymakers have advocated simplification as well as harmonization. The paper surveys the literature drawing on the extensive database in ITC’s Rules of Origin Facilitator (ROF) database covering 54,000 distinct PROO spread across 370 PTAs to illustrate the issues covered in the literature. We review what we know about the compliance costs associated with PROO requirements. We illustrate these costs graphically and summarize through mathematical decomposition of compliance costs along two dimensions: distortionary costs resulting from the restrictiveness of PROOs and administrative costs. We survey the existing evidence in literature by themes: (i) determinants of the utilisation of preferences; (ii) effects on third countries outside the PTA; (iii) choice of rule; (iv) preference margin and complexity of rules; (v) trade deflection; and (vi) firm-level evidence. In conclusion, drawing lessons from the empirical literature is a complicated exercise because preference uptake, an important indicator of compliance costs, is only available for a handful of PTAs at the disaggregated product level. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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16 pages, 582 KiB

Open AccessArticle

Inflation and Hyperinflation Countries in 2018–2020: Risks of Different Assets and Foreign Trade

by Olli-Pekka Hilmola

J. Risk Financial Manag. 2021, 14(12), 618; https://doi.org/10.3390/jrfm14120618 - 20 Dec 2021

Cited by 2 | Viewed by 8275

Abstract

Since the global financial crisis (2008–2009), central banks and governments in developed countries have relied upon loose monetary and financial policy. In the coronavirus pandemic era, these policies were taken even more to the extreme. In 2021, countries around the world started to [...] Read more.

Since the global financial crisis (2008–2009), central banks and governments in developed countries have relied upon loose monetary and financial policy. In the coronavirus pandemic era, these policies were taken even more to the extreme. In 2021, countries around the world started to experience product availability issues, and inflation in some cases was extremely high. There has been debate about the possibility of persistent high inflation. However, risks to assets and foreign trade in this new situation are unknown as all important hyperinflation cases are from decades to century-old. It is important to know what kind of implications high inflation has on modern economies. Therefore, in this study, 10 countries with the highest inflation were selected to be examined in the period of 2018–2020. In these countries, currencies lost a considerable amount of their value against US dollar in 2018–2020. Stock market indexes in many cases provided very high returns in local currency terms; however, against the US dollar, the index yield changed for the substantially negative. Apartment prices in general declined as well. In foreign trade, imports generally declined, while exports were mixed or even increased. However, it should be noted that all of these observations are influenced by the pandemic era and special circumstances of a particular country. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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18 pages, 1450 KiB

Open AccessArticle

Does the Exchange Rate and Its Volatility Matter for International Trade in Ethiopia?

by Tiblets Nguse, Betgilu Oshora, Maria Fekete-Farkas, Anita Tangl and Goshu Desalegn

J. Risk Financial Manag. 2021, 14(12), 591; https://doi.org/10.3390/jrfm14120591 - 8 Dec 2021

Cited by 9 | Viewed by 4998

Abstract

This study was carried out to investigate the impact of the Ethiopian exchange rate and its volatility on international trade. Trade openness was used as a proxy for international trade in the study. The study’s general objective was to investigate how international trade [...] Read more.

This study was carried out to investigate the impact of the Ethiopian exchange rate and its volatility on international trade. Trade openness was used as a proxy for international trade in the study. The study’s general objective was to investigate how international trade responds to exchange rate levels and volatility. The study relied solely on secondary time-series data spanning the years 1992 to 2019. The Autoregressive Distributive Lag (ARDL) model was used in the study to investigate the long-term relationship between exchange rate level, volatility, and international trade performance. An error correction model was used to estimate the variables in the short term. To conduct the regression analysis, Foreign Direct Investment (FDI), Gross Domestic Product (GDP), and inflation were used as control variables. The finding of the study implies that: in the short term, the exchange rate level was found to negatively and significantly influence international trade. However, exchange rate volatility positively and significantly affects international trade both in the short and in the long term. In addition, gross domestic product, foreign direct investment, and inflation have a positive effect on international trade both in the short term and long term. This finding lends support to the J-curve effects, which suggest an initial loss in the short term followed by a dramatic gain in the long term. However, the findings of this study suggest that there is no significant gain from international trade to justify currency depreciation in Ethiopia. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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23 pages, 461 KiB

Open AccessArticle

Whose Policy Uncertainty Matters in the Trade between Korea and the U.S.?

by Mohsen Bahmani-Oskooee and Jungho Baek

J. Risk Financial Manag. 2021, 14(11), 520; https://doi.org/10.3390/jrfm14110520 - 1 Nov 2021

Cited by 4 | Viewed by 1710

Abstract

Since the introduction of the news-based policy uncertainty measure, a few studies have looked at its impact on trade flows by using panel models and aggregate trade data. In this paper we consider the short-run and long-run response of 61 2-digit U.S. exporting [...] Read more.

Since the introduction of the news-based policy uncertainty measure, a few studies have looked at its impact on trade flows by using panel models and aggregate trade data. In this paper we consider the short-run and long-run response of 61 2-digit U.S. exporting industries to Korea and 49 2-digit Korean exporting industries to the U.S. to policy uncertainty measures of the U.S. and Korea. We find that both measures have short-run effects on exports of almost one-third of industries in either direction. In the long run, however, while nine U.S. exporting industries (with a trade share of 9%) are negatively affected by the Korean uncertainty measure, only five industries (with 6% export share) are affected by the U.S. uncertainty measure. As for the Korean exporting industries, we find that three industries with a 31% export share are affected positively by the Korean uncertainty measure and six industries with a 7% export share are affected positively by the U.S. uncertainty measure. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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26 pages, 1007 KiB

Open AccessArticle

The Labour Market Effects of International Trade in the Presence of Vertical Product Differentiation: Some Methodological Remarks in Retrospect

by Giuseppe Celi

J. Risk Financial Manag. 2021, 14(3), 109; https://doi.org/10.3390/jrfm14030109 - 6 Mar 2021

Viewed by 3339

Abstract

The paper retrospectively analyses the issue of the impact of international trade on developed countries’ labour markets in the 1990s, when the majority of academic opinion denied the role of trade in the misfortunes of unskilled workers. An analytical framework is proposed in [...] Read more.

The paper retrospectively analyses the issue of the impact of international trade on developed countries’ labour markets in the 1990s, when the majority of academic opinion denied the role of trade in the misfortunes of unskilled workers. An analytical framework is proposed in which intra-industry trade is explained in terms of countries’ factor endowments and factor intensities of goods. Unlike the traditional Heckscher–Ohlin model of inter-industry trade, the model suggested here is more consistent with stylised facts about North–South trade. The paper also proposes a method for empirically assessing factor substitution effects at the product level. Inferring the factor content of intra-industry trade from the inter-sectoral relationship between factor intensity and average unit values of exports, the paper found that the labour market effects of intra-industry trade add significantly to the estimated factor market impact of trade. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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15 pages, 310 KiB

Open AccessArticle

Trade and Infrastructure in the Belt and Road Initiative: A Gravity Analysis Based on Revealed Trade Preferences

by Cristina Di Stefano, P. Lelio Iapadre and Ilaria Salvati

J. Risk Financial Manag. 2021, 14(2), 52; https://doi.org/10.3390/jrfm14020052 - 26 Jan 2021

Cited by 10 | Viewed by 4047

Abstract

This paper aims at investigating whether and how the intensity of trade between a pair of countries changes when they experience improvements in their infrastructural systems. We carry out our analysis considering countries participating in the Belt and Road Initiative (BRI), a project [...] Read more.

This paper aims at investigating whether and how the intensity of trade between a pair of countries changes when they experience improvements in their infrastructural systems. We carry out our analysis considering countries participating in the Belt and Road Initiative (BRI), a project specifically designed to promote infrastructural connectivity and therefore boost trade among the countries involved. Our empirical strategy relies on a particular specification of the gravity model, in which the dependent variable consists in an index of revealed trade preferences, calculated by comparing the actual value of trade flows between two countries with their expected value, proportional to the two countries’ total trade. Such methodology allows us to estimate bilateral trade intensity without resorting to the traditional “size” variables of the gravity model, taking the entire network of multilateral trade into account. We then study the possible impact of an improvement in infrastructure on a ‘gravity-adjusted’ measure of trade preferences, given by the residuals of our first estimations. Our results indicate that bilateral preferences among BRI countries will intensify inasmuch as they succeed in coordinating their infrastructural projects. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

20 pages, 2207 KiB

Open AccessArticle

Trade Policy Uncertainty Effects on Macro Economy and Financial Markets: An Integrated Survey and Empirical Investigation

by Nikolaos A. Kyriazis

J. Risk Financial Manag. 2021, 14(1), 41; https://doi.org/10.3390/jrfm14010041 - 18 Jan 2021

Cited by 9 | Viewed by 4781

Abstract

This paper conducts a review on theoretical and empirical findings on the increasingly popular measure of trade policy uncertainty (TPU) in economics and finance. Moreover, an empirical investigation takes place in order to find the impact that TPU exerts on Bitcoin market values [...] Read more.

This paper conducts a review on theoretical and empirical findings on the increasingly popular measure of trade policy uncertainty (TPU) in economics and finance. Moreover, an empirical investigation takes place in order to find the impact that TPU exerts on Bitcoin market values by employing a spectrum of Generalized Autoregressive Conditional Heteroskedasticity (GARCH) specifications. Existing studies support that trade policy uncertainty leads to lower-quality and more expensive products and weak participation in international trade. Moreover, it contributes to lower democratic sentiment, hesitant internal migration and lesser socio-economic mobility and higher fluctuations in profitable assets. Moreover, our econometric findings reveal that TPU positively affects Bitcoin prices while crude oil values negatively influence this major cryptocurrency. Thereby, higher trade policy uncertainty is found to increase demand and favorite investments into risky assets in order to ameliorate the risk-return trade-off in investors’ portfolios. This study provides a compass for investing during turmoil due to trade wars and tariffs. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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20 pages, 499 KiB

Open AccessArticle

The Trade Effect of the EU’s Preference Margins and Non-Tariff Barriers

by Maria Cipollina and Federica Demaria

J. Risk Financial Manag. 2020, 13(9), 203; https://doi.org/10.3390/jrfm13090203 - 9 Sep 2020

Cited by 9 | Viewed by 5716

Abstract

Nowadays, trade negotiations afford both liberalism- and protectionism-oriented policies. Indeed, in recent decades, the developed countries have been actively engaged in negotiating many preferential agreements to integrate developing countries (DCs) into world trade and encourage their economic growth, but many of these schemes [...] Read more.

Nowadays, trade negotiations afford both liberalism- and protectionism-oriented policies. Indeed, in recent decades, the developed countries have been actively engaged in negotiating many preferential agreements to integrate developing countries (DCs) into world trade and encourage their economic growth, but many of these schemes contrast with the complex rules, often imposed on international markets, that still are an obstacle for exporters. Their presence and related costs reduce the importance of preferential trade agreements (PTAs) in increasing trade flows. This article attempts to assess the impact of preferential trade policies on trade flows controlling for different non-tariff barriers (NTBs), using a structural gravity model. The analysis uses disaggregated data, registered in the year 2017, on EU imports (defined at level HS-6 digit) from a large number of exporters (187 developed and developing countries) and also includes the intra-EU trade. Our results show robust and positive estimates for the impact of preferences on bilateral trade flows, however, higher non-tariff barriers are likely to play a role in reducing both the extensive margins of trade, and so tariff preferences alone are not sufficient to access international markets. The impact of NTBs on the intensive margin of trade is ambiguous; some measures may act as catalysts and therefore increase trade, and others may act as an additional cost of trade and thus hinder trade. Full article

(This article belongs to the Special Issue International Trade Theory and Policy)

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