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Project

Essays on Recent Developments in International Trade

This doctoral dissertation contains five chapters on various topics on empirics in international trade. The first two chapters estimate the impact of trade agreements on exports using a gravity model. Most of the gravity literature looks only at the total effect of trade agreements and ignores trade diversion. These potential adverse consequences on third countries have been well-known since Viner (1956), but empirical evidence has been inconclusive. In the first chapter, I propose a proxy indicator that can be used inside the gravity framework to estimate the magnitude of trade diversion. The results show that trade diversion accounts for more than half of the total effect.

In the second chapter, the gravity model is extended to allow for anticipation effects, a phase-in period, and a long adjustment process. The gravity model with fitted Gompertz curve shows that the process lasts on average 15-20 years, and that short-run estimates significantly underestimates the long-term increase in trade.

In the third chapter, the focus is shifted away from the total trade to its subset, namely simultaneous two-way trade of similar products (intra-industry trade). The fact that trade declines with distance is well understood, however, it is less known that intra-industry trade declines even faster. The paper shows that the empirical relationship is very robust, but it applies mostly to trade between large countries. The paper extends the theoretical Ricardian model to account for observed empirical facts.

Last two chapters look at two recent events in European trade. One of them looks at international trade during the recent economic crises in Europe. While the financial crisis of 2008-2009 led to the great collapse of international trade, the European debt crisis in 2010-2013 did not have such a drastic impact. The chapter aims to explain this difference.

The final chapter uses the aftermath of 2016 Brexit referendum as a natural experiment to study exchange-rate pass through. It exploits the fact that the post-referendum depreciation of the British pound was a large, exogenous, and mostly unexpected event, that did not affect other trade costs. The Synthetic Control Method (Abadie & Gardeazabal, 2003) is used to estimates counterfactual UK trade prices as a weighted average of the remaining EU27 countries. The results show that, on average, trade prices responded to the depreciation immediately, but incompletely.

Date:1 Oct 2012 →  24 Oct 2018
Keywords:trade agreements, trade diversion, exchange rates, international trade
Disciplines:Applied economics, Economic history, Macroeconomics and monetary economics, Microeconomics, Tourism
Project type:PhD project