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This paper identifies industries in Tanzania that are critical for (i) upgrading and diversifying the economy, (ii) increasing export revenue and (iii) absorbing labour. First, a Product Space analysis identifies industrial niches, which Tanzania should promote to increase economic complexity and stimulate structural transformation. The identification of industries is based on a supply‐side network method following the literature on economic complexity. Second, we combine the complexity analysis with a gravity model, identifying industries with high, demand‐driven export potential. In combination, the supply‐and‐demand framework finds industries that are complex, feasible to target given Tanzania's existing know‐how and profitable to export given product‐specific trade resistance and geographically dispersed demand. Third, we construct an employment absorption index to identify industries with a high labour intensity. Our findings suggest a high export potential and scope for learning spillovers in complex sectors, such as machinery and chemicals. In contrast, less complex sectors, such as agro‐processing, metal and wood, are correlated with higher employment creation. [ABSTRACT FROM AUTHOR]

This article is an introduction to this Special Issue on Rethinking in Regional Integration in Africa which is based on a collaborative research project, implemented by African Economic Research Consortium (AERC), the leading economic capacity building institution in Africa, and funded by the African Development Bank (AfDB). This project is very timely given the establishment of the African Continental Free Trade Area (AfCFTA) which came into force on 01 January 2021. In this introduction, we first provide a brief background on regional integration in Africa. We next describe the AERC project and the process of selection of the papers and then provide a quick summary of the ten published papers and their contributions. [ABSTRACT FROM AUTHOR]

This paper develops a digital platform restrictiveness index for 64 countries based on ECIPE's Digital Trade Estimates database and the Digital Trade Restrictiveness Index. We identify specific restrictions that affect online platforms with a focus on online search, e‐commerce and social media. The results show that both OECD and non‐OECD countries show high levels of trade restrictions on online platforms. Moreover, some of the most restricted countries are characterised by large markets, signifying that a substantial part of the global economy gravitates towards restricting online platforms. Based on the platform restrictiveness index, we perform an econometric analysis showing that trade restrictions for online platforms are significantly associated with lower contributions of the ICT sector to productivity growth in the entire economy. The results suggest that reducing restrictions on online platforms can increase the ICT's contribution to overall productivity growth towards a level seen before the global financial crisis. Sectors that would benefit the most are those that make wider use of online platforms and the Internet, including information services, business services and financial services. [ABSTRACT FROM AUTHOR]

The papers in this symposium were initially presented at the Global Political Economy Network conference at Loughborough University in London in April 2019. It is also possible that female-led firms may find it harder to implement innovations learned by exporting: this seems to be particularly a problem facing larger female-led firms. Rather than treating institutions as exogenous and policy as endogenous, these authors investigate the effect upon institutions of a policy choice to adopt inflation targeting. [Extracted from the article]

Cross‐border travel for business, personal and tourism purposes is an important component of trade in services. In 2013, travel accounted for 25% of services export in the world. Trade in services accounted for 12% of GDP in the world. Hence, the role of travel in many economies is substantial. The current paper studies the determinants of cross‐border flows of people with a particular emphasis on the role of visa policies. We adopt the UN General Assembly Affinity Index, a measure of the quality of bilateral relations between nations, to instrument for bilateral visa policy. We find that, ceteris paribus, imposing visa restrictions on a country reduces travel from that country by about 73% in 2010 implying restrictive visa policies discourage cross‐border travel significantly. This implies an adverse impact of restrictive visa policies on trade‐in‐services. [ABSTRACT FROM AUTHOR]

This paper investigates how labour market regulations alter the adverse impact of rising import competition from China in European local labour markets between 1997 and 2006. The paper constructs measures of regional exposure to Chinese imports based on previous literature and on regional labour market frictions exploiting involuntary labour reallocations. Taking into account the endogeneity of import competition and its interaction with labour market regulations, the paper finds that regions more exposed to the rise of China have suffered from a reduction in manufacturing employment shares. This shock grows larger with regional labour market frictions; hence, it exacerbates the impact of trade shock on employment. Moreover, the paper finds that employment in public services, and not in construction or private services sector, absorbed the negative shock to the manufacturing sector. The unemployment rate, the labour force participation rate and wages in all sectors are unresponsive to import competition from China. [ABSTRACT FROM AUTHOR]

This paper deals with what is referred to in the literature as the ‘Inflation Targeting Lite’ (ITL) countries. These are a category of emerging countries, whose main characteristics are that they are least developed and small economies that pursue IT. They use inflation targeting to define their monetary policy framework, but for a number of reasons they are not in a position to put top priority to IT in relation to other objectives. This paper deals with a set of ITL countries for which consistent data could be gathered, and for which a date for setting inflation targeting could be discerned. The object of the paper is to study the impact of IT on actual inflation and inflation expectations. We utilise intervention analysis to time series on inflation for a number of ITL countries, which have actually implemented IT. In doing so our main concern is to assess whether, due to the IT intervention, there has been a significant change in the trend corresponding to these series and the extent to which inflation rates have actually been ‘locked-in’ at low levels after the implementation of IT. Two major results emerge. The first is that ITL countries have been successful in ‘locking-in’ inflation rates. The second is that non-IT countries have also been successful in terms of the ‘lock-in’ effect. Our overall conclusion, then, is that other factors in addition to IT underpin the apparent success of the control of inflation. [ABSTRACT FROM AUTHOR]

This special issue gathers together twelve papers that revisit a range of core topics in the field of international economics. These papers were presented at the XIX Conference on International Economics (CIE) held in Vila‐Real (Spain) on 28th–29th June 2018. The Conference was co‐organized by researchers from the Spanish Association of International Economics and Finance (AEEFI) and the Institute of International Economics (IEI). The selected papers are stimulating pieces that shed new light on recent trends in globalization as well as some of the main challenges that need to be faced in the presence of the multiple yield curves that emerged after the credit crunch. The CIE also included two keynote lectures by Laura Alfaro (Harvard Business School) and Gabriel Quirós (IMF) as well as 64 selected contributions. [ABSTRACT FROM AUTHOR]

This paper examines two hypotheses about the effects of UN sanctions on trade flows between land neighbours of the target country and the rest of the world. First, there have been claims that sanctions hurt neighbour countries by cutting off trading routes, increasing transportation costs and disrupting established trading ties. We would expect that a neighbour's trade with the rest of the world would fall, as a result. Second, there is extensive evidence that neighbours have been involved in smuggling. Consequently, neighbours should trade more with the rest of the world during UN trade embargoes, because now they also trade on behalf of the target. I employ the gravity model of international trade to show that, overall, a neighbour's trade with the rest of the world tends to fall during UN sanctions episodes. This confirms the first hypothesis above: on a net basis, land neighbours have been ‘innocent bystanders’ hit by UN sanctions. [ABSTRACT FROM AUTHOR]

This paper tests the significance of FDI as a way to alleviate credit constraints. Incoming foreign investment provides additional sources of capital. Specifically in the Chinese case, enterprises may look for foreign investors, being constrained in their activity due to distortions in the state-dominated system. First, the Chinese financial system allocates resources to the least efficient firms – state-owned enterprises – while denying the same resources to Chinese private enterprises, forcing them to look for a foreign investor. Second, the inefficient system of state investment planning leads to mismanagement of public enterprises, increasing ‘insolvency-induced FDI’. We propose to analyse determinants of FDI in Chinese provinces to test the above hypotheses. We control for traditional determinants of FDI such as market access, labour costs, productivity, infrastructure, reform advances and banking sector size in order to assess the impact of inter-provincial heterogeneity in terms of the access that private enterprises have to credit and the distortive management in state-owned firms. [ABSTRACT FROM AUTHOR]

This paper investigates whether the rapid expansion of international trade after China's WTO entry in 2001 promotes the spread of severe acute respiratory syndromes (SARS) in 2003. Examining the relationship is helpful to distinguish the hidden costs of trade openness. This paper uses Frankel and Romer (1999, The American Economic Review, 89, 379) framework to construct the geography‐based instruments by applying province‐country gravity relation for causal identification. Utilising cross‐section data of SARS cases of 31 provinces in China, our two‐stage least squares regression results show that international trade accelerates the spread of SARS. Cross‐country evidence also suggests the causal relation. In addition, we find that the people's inter‐provincial mobility driven by trade expansion drives the spread of epidemic diseases. [ABSTRACT FROM AUTHOR]

This paper selects 141 countries from 2009 to 2020 to investigate the impact of genetic distance on bilateral foreign direct investment (FDI). Through theoretical and empirical analysis, we get the following conclusions. First, genetic distance has a significant negative impact on bilateral FDI by increasing transaction costs. This conclusion still holds after several robust checks. Second, genetic distance has different effects on bilateral FDI for different countries: (1) If at least one of the two countries is a low‐income country, genetic distance will have a significant negative impact on their FDI, but no significant impact on both high‐income countries; (2) if at least one of the two countries is not a member of the Belt and Road Initiative, genetic distance will have a significant negative impact, but no significant impact on both member countries; and (3) genetic distance has a significant negative impact only when both countries are World Trade Organization members. Third, further analysis shows that a smaller genetic distance has no significant effect on bilateral FDI, and only when the genetic distance is larger than the average would a significant negative impact exists. This paper provides policy recommendations for promoting bilateral investment. [ABSTRACT FROM AUTHOR]

This paper studies the impact of the COVID‐19 pandemic on greenfield investments using a large panel dataset comprising 78 countries and regions at the monthly level from January 2019 to August 2021 (32 months). Particular attention is paid to whether the Belt and Road (BRI), a regional cooperation initiative, contributes to mitigating these shocks. Three indicators are used to measure greenfield investments, i.e., capital inflows, projects and employees. The lockdown measure due to the pandemic is used to conduct a difference‐in‐difference analysis. This paper finds that the pandemic significantly reduces global greenfield investments, while the BRI participants experience a lesser shock than the non‐BRI countries (regions). Robustness checks using the numbers of monthly confirmed cases and deaths also support the role of the initiative in helping the BRI participants to mitigate the negative impact of the pandemic on greenfield investments. [ABSTRACT FROM AUTHOR]

In traditional trade models, whether based on technological differences or on relative factor endowments, merchandise composition and directions of trade are derived from closed-economy conditions. But nowadays one of the basic assumptions of traditional trade models, i.e. that production processes are integrated within just one country, is being increasingly violated as previously integrated productive activities are segmented and spread over an international network of production sites: as a result, an increasingly large share of trade flows is made up of intermediate and unfinished goods being transferred from one country to another in order to be processed. In this paper we submit that such new configuration of production processes has important effects on at least three dimensions of economic research. First, we show that international disintegration of production processes leads to a lessening of the power of comparative advantages when it comes to explaining both merchandise composition and directions of trade, while it is the concept of absolute advantage to become increasingly relevant; second, we show that empirical measures of revealed comparative advantages are inherently misleading if they do not account for differences in the stage-of-processing of traded goods; third, we estimate a simple model of aggregate demand accounting for international trade in intermediates: results of estimation lend support to our prior that participation of a country in the process of international fragmentation of production plays a specific and significant role in determining its year-over-year change in GDP. [ABSTRACT FROM AUTHOR]

This paper examines the intellectual contributions of Professor W. M. ('Max') Corden to Economics. We focus on three main fields: trade theory and practice, especially his pioneering work on the theory of effective protection; open economy macroeconomics, including exchange rate policy, the international monetary system, Dutch Disease and economic crises; and Australian economic policy. We emphasise Max's motivation for working on these topics, as he sought to understand real‐world economic issues and challenges and to employ economic theory and expositional clarity in search of policy reform. We also draw attention to his personal life history, and how it has shaped his thinking on major economic and political questions. [ABSTRACT FROM AUTHOR]

The paper assesses the ex‐post trade effect of sub‐regional trade agreements (RTAs), financial integration and other non‐tariff barriers on intra‐regional trade involving 43 Sub‐Saharan Africa (SSA) countries. The objective is to find out if RTAs within SSA had increased trade flows to inform current efforts of establishing a successful continental free trade area in SSA. Estimating a gravity model augmented with measures of trade agreements and financial integration, the paper made use of bilateral trade flows and key gravity covariates from CEPII database over the period 1960–2015. After controlling for the endogeneity of the trade agreement dummy, multilateral price resistance and zero‐valued trade flows, we find RTAs within SSA and especially among Economic Community of West African States and Southern Africa Development Community members to have had a positive and significant impact on bilateral trade. Financially integrated trading partners also traded more, while we also found distance, landlockedness, common currency and colonial link to have an impact on trade costs and bilateral trade flows within SSA. The results indicate the need to focus on policies to expand and integrate regional markets in SSA by removing impediments to trade and improving on trade facilitation measures to significantly improve trade performance under the newly established African Continental Free Trade Area. [ABSTRACT FROM AUTHOR]

This paper makes the case for analysing the political economy of regional integration in Africa to help address the implementation gap that affects African economic integration. It builds on the "two‐level games" model of inter‐state negotiations developed by Putnam (International Organisation, 42, 1988, 427) and the "five lenses" approach to political economy analysis proposed by Byiers et al. (African Economic Brief, 6, 2015, 1). The paper then applies the approach to Nigeria's engagement with AfCFTA negotiations, and identifies potential constraints, challenges and opportunities in relation to the implementation of the AfCFTA by Nigeria. At the continental level, Nigeria's power and aspirations to continental leadership allowed and inspired it to play a prominent role in the AfCFTA negotiations. However, within‐country dynamics in Nigeria slowed the signing of the AfCFTA Agreement and the same may yet undermine its implementation. More broadly the Nigerian case study illustrates the kinds of actors and factors that will shape how other African states implement the AfCFTA. In this regard political economy analysis, and in particular, the methodological approach developed here, can help understand the interests, incentives and agency at play in domestic contexts. [ABSTRACT FROM AUTHOR]

This paper studies welfare gains from trade in a tractable model with a nonhomothetic preference over product quality. We show that the welfare changes due to trade shocks are unequal across consumers and derive a parsimonious formula to measure these welfare changes as in Arkolakis et al. (2012, American Economic Review, 102, 94–130). We find that the welfare changes are larger for consumers with lower income. Moreover, this paper shows that the welfare implications are different between a change in (iceberg‐type) variable trade cost and a change in tariff when tariff revenue matters. More importantly, we show that the difference varies across consumers with different income levels. [ABSTRACT FROM AUTHOR]

The digitalisation of economic activities, combined with a secular slowdown in the growth of global output and trade, reduces the potential of traditional export‐oriented manufacturing as a development strategy. This paper takes a trade economics perspective to outline a possible response to the changed nature of industrialisation. The outlined response currently applies mainly to middle‐income countries but deserves attention also in longer‐term development strategies of low‐income countries. The paper argues that digital technologies affect trade costs through various mechanisms, which apply differently to manufactures and services and determine decisions of multi‐product firms on what to produce for what market. Emphasising big data analysis of customer preferences as an input to manufacturing, the paper finds that (i) industrialisation and service‐oriented development strategies are complements, rather than substitutes; (ii) access to data on customer preferences is an asset for developing countries; and (iii) data governance, which harnesses the increasing dependence of manufacturing on data, and innovation policies, which give greater importance to indigenous innovation, crucially augment the potential of industrialisation as a development strategy in a digital era. [ABSTRACT FROM AUTHOR]

This study examines the socioeconomic impact of Special Economic Zones (SEZs) in Cambodia--a prominent place-based policy established in 2005. The paper employs a database on existing and future SEZs in Cambodia with matched household surveys at the district level and documents stylized facts on SEZs in a low-income country setting. To identify the causal effects of the SEZ program, the paper (i) constructs an alternative control group including future SEZ program participants and districts adjacent to SEZ hosts; and (ii) employs a propensity score weighting technique. The study finds that entry of SEZs increases employment and leads to a decline in income inequality at a district level. Gains in female employment is the key channel explaining rising employment rates. The paper also finds that school drop-out rates are higher in districts with clusters of multiple SEZs. [ABSTRACT FROM AUTHOR]

This Special Issue (SI) gathers 13 papers presented at the 23rd INFER Annual Conference which took place in Lisbon, 8-10 September 2021, at ISEG - Lisbon School of Economics and Management. The conference was organised by INFER (International Network for Economic Research), UECE (Research Unit on Complexity and Economics), and REM (Research in Economics and Mathematics). The papers of the SI focus on key topics in international macroeconomics, revisit the fiscal policy conduct within a globalised world, investigate how uncertainty and risk affect macroeconomic policies, and analyse the links between labor market outcomes, automation, and economic integration. [ABSTRACT FROM AUTHOR]

A large volume of econometric literature has studied the effects of economic globalisation on economic growth around the world. Reported results, however, vary considerably, which makes it difficult to draw valid conclusions. This paper applies meta‐analysis and meta‐regression methods to a novel dataset consisting of 5542 estimates on globalisation–growth effects reported in 516 primary studies. We find evidence for publication selection bias in favour of positive growth effects of globalisation. After correcting for this bias, the size of the effect of economic globalisation on output growth is more than halved, but it remains positive. The growth‐promoting effect, however, is due to trade globalisation, as we cannot reject the hypothesis that the impact of financial globalisation on growth is, on average, zero. The meta‐regression results also reveal that the growth effects of economic globalisation have varied over time, and that education and institutions serve as significant moderator variables. [ABSTRACT FROM AUTHOR]

While there is an extensive literature examining the economic impact of conflict and political instability, surprisingly, there have been few studies on their impact on the probability of banking crises. This paper therefore investigates whether rising conflict and political instability globally over the past several decades led to increased occurrence of banking crises in developing countries. The paper provides strong evidence that conflicts and political instability are indeed associated with higher probability of systemic banking crises. Interestingly, the paper also finds that conflicts and political instability in one country can have negative spillover effects on neighbouring countries' banking systems. The paper provides evidence that the primary channel of transmission is likely to be the occurrence of fiscal crises following a conflict or political instability. [ABSTRACT FROM AUTHOR]

Many US policymakers on both sides of the aisle, including President Trump, have called on the US Federal Reserve to cut interest rates to depreciate the US dollar. This paper uses an intertemporal general equilibrium model to explore what would likely happen if this policy was pursued. It shows that the general equilibrium effects of a depreciated real effective exchange rate brought about by lower US interest rates can result in a wide variety of unintended consequences. The paper explores what would happen if US trading partners were to retaliate by devaluing their currencies. [ABSTRACT FROM AUTHOR]

The paper explores carefully the links between trade costs and global value chains using a multi-country and sector model and investigates the effect of changes in trade costs on value chain trade. The issues covered by the paper are central to recent developments in trade and trade policy; namely, the capturing of trade policy and other influences on trade costs and a recognition of the distinction between trade in final and intermediate goods and the associated growth globally in value chain trade. The Editors of I The World Economy i are pleased to announce the establishment of I The Corden Prize i . [Extracted from the article]

In recent years, increased availability of services trade data and measures of non‐tariff barriers has enabled more detailed analysis of trade patterns, including the relationship between different modes of service delivery across international borders. This paper uses a detailed, sector‐level structural gravity model to shed light on the question of whether services trade via foreign affiliate sales (also known as mode 3 trade) is a complement or substitute for cross‐border services trade (modes 1, 2, and 4) in 13 services sectors. In 9 of the 13 sectors considered, there is a negative and significant relationship between trade policies that limit foreign affiliate sales and cross‐border trade, indicating a complementary relationship between the two types of trade flows. This suggests that when services firms export, they rely on multiple modes of supply to deliver their products, considering factors such as the degree of service tradability over the internet, levels of customer interaction, and complexity of particular tasks. [ABSTRACT FROM AUTHOR]

This paper analyses the implications of a complete halt of natural gas flows from Russia to the European Union (EU). The most challenging time horizon for the EU will be the winter of 2022/23 due to the little time available to roll out necessary measures to diversify the gas supply and develop alternatives to Russian gas. We explore supply availability and constraints as well as demand curtailment options. The challenge of refilling EU gas storage levels at the current abnormal prices for natural gas is also addressed. Finally, we consider the Russian standpoint and whether they would be able to redirect gas flows where European demand to suddenly dry up. [ABSTRACT FROM AUTHOR]

Several studies have demonstrated that corruption hinders efforts in enhancing public revenue and fiscal space through different channels. This paper assesses the effect of tax reform on fiscal space conditional on corruption control for a large panel of developing and emerging economies from 1990 to 2016. Using a threshold approach, our findings indicate that the tax reform effect on fiscal space is not monotonic and depends on corruption control. Tax reform enhances fiscal space and tax revenue when corruption control is better. The results also suggest that heterogeneity across countries and time does matter. Individual estimates of the elasticity of fiscal space to tax reform support evidence that countries that benefit most from tax reform are those that prove enough ability to control corruption. [ABSTRACT FROM AUTHOR]

This paper presents evidence on the importance of bank‐intermediated trade finance for the intensive margin of African trade, using unique data from 43 African countries. It shows that African trade is underserved by banks. Banks intermediate about 40% of the region's trade – a far lower share than the global average of 80%. It finds that bank‐intermediated finance has a positive and significant effect on the intensive margin of African trade, even after accounting for the impact of domestic credit to the private sector. Estimates from standardised coefficients show that the impact of access to trade finance on trade volume for Africa is large and exceeds that of exchange rate volatility and trade logistics. These results suggest that policies aimed at promoting the region's trade should make access to bank‐intermediated finance a priority. [ABSTRACT FROM AUTHOR]

The unprovoked and brutal invasion of Ukraine by Russia on 24 February 2022 is imposing a terrible human cost. In this paper, we use the National Institute Global Econometric Model (NiGEM) to quantify the impact of the war on the global economy. The war represents a massive cost, equivalent to 1% of global GDP in 2022, or about $1.5 trillion valued at purchasing power parity exchange rates (PPP), compared with our GDP forecast made at the beginning of 2022. Europe is the region affected most, given trade links its proximity to Ukraine and Russia and its reliance on energy and food supplies from those countries. GDP in Europe is expected to shrink by more than 1% in 2022 compared with our forecast at the beginning of 2022. In Western Europe, Germany will be worst affected, followed by France and Italy. GDP in 'Developing Europe', where Ukraine is the largest representative, is expected to shrink by 30%. The war will also add about 2% to global inflation in 2022 and 1% in 2023, compared with NIESR's inflation projection at the beginning of 2022. [ABSTRACT FROM AUTHOR]

A large literature has developed around alternatives to gross domestic product (GDP) per capita for cross‐country comparisons of well‐being. Many of these studies point to non‐economic factors that affect well‐being but are not captured in the traditional GDP measure. With a comprehensive coverage of economies available through the World Bank's International Comparison Programme (ICP) databases at six‐yearly intervals, this paper utilises the ICP 2011 Purchasing Power Parity (PPP)‐based expenditures and builds upon it through an analysis of residuals from cross‐country Engel curve regressions. The methodology draws on the idea that patterns in Engel curve residuals can reveal inter alia previously unmeasured aspects of human well‐being such as optimism or pessimism. The paper demonstrates how a residual‐based model of Revealed Optimism/Pessimism can be neatly integrated with PPP‐based GDP to provide an extended measure of national well‐being, referred to here as 'Effective GDP'. As a result, a wider disparity in well‐being across economies is revealed than could be discerned simply from the ICP data. The results suggest that, in 2011, Effective GDP extends traditional PPP‐based GDP estimates by around two per cent in the positive direction for apparently optimistic economies and as much as five per cent downwards for pessimistic ones. [ABSTRACT FROM AUTHOR]

We are delighted to see Dr Alan King's interest and curiosity in the subject of PPP and, in particular, this paper of ours. This is a Rejoinder to his Comment. [ABSTRACT FROM AUTHOR]

This paper is the first to analyse the impact of free trade agreements (FTAs) and the harmonisation of rules of origin (RoO) on Middle East and North African (MENA) countries' exports differentiating between final and intermediate goods for a global sample of trade partners. Data on exports from four MENA countries (Egypt, Jordan, Morocco and Tunisia) to 61 destinations over the period 1995–2016 are used to estimate a structural gravity model applying a Poisson Pseudo Maximum Likelihood (PPML) estimator. Moreover, the paper estimates the effect of the progressive adoption of the Pan‐European‐Mediterranean RoO. Results show that FTAs have been overall successful in increasing MENA exports. This is particularly true for FTAs that eliminate protection on agricultural products. In contrast to the existing literature, we find that the agreements concluded with European countries raise MENA exports, whereas no significant impact is found for the application of the Pan‐European RoO. [ABSTRACT FROM AUTHOR]

To capture the mixed picture of trade‐induced human capital investment in both developing and developed countries, this paper develops a dynamic general equilibrium model with multinational enterprises (MNEs) and endogenous education investment decision and investigates the impacts of trade cost reduction on human capital accumulation and wage inequality. Illustrated with a numerical example, we show that with endogenous endowment structure, the set of active firm types is mutually determined by trade cost and the discrepancy in the incentives for education attainment between countries. In addition, the exact impacts of trade are determined by changes in the production patterns of firms. When the reduction in trade cost expands the scale of vertical MNEs with headquarters in developed countries, education investment increases in both developing and developed countries. We also show that the distributional impacts of production offshoring are mitigated by human capital accumulation. The conclusions in this paper highlight the importance of education policies in complementing trade policies, as well as the important role of MNEs in shaping the world income and endowments distribution. [ABSTRACT FROM AUTHOR]

The world has been experiencing dramatic demographic change since the 1950s, with almost all countries facing ageing challenges this coming century. However, the timing and speed of this demographic transition are significantly asymmetric across countries. This paper examines the impacts of global demographic change on macroeconomic conditions, international trade and capital flows in major economies in a global multi‐region and multi‐sector general equilibrium model. We separately simulate demographic shocks in six regions of the world economy to understand how each shock individually affects the world economy and then combine these shocks to obtain the consequences of global demographic change. The paper finds that future demographic change will significantly impact each region's GDP, changing the landscape of the world economy. However, the spillover effects on GDP across the countries are relatively small. In young economies such as emerging Asia and Africa, while economic growth will significantly benefit from demographic dividends, demographic change does not improve per capita GDP. In ageing economies such as Japan and Europe, population ageing will decrease the real interest rate. However, this impact will be offset by rising interest rates in young economies. Due to the differential real interest rates, capital will flow from more ageing to less ageing economies. These capital flows can be substantial and beneficial for all economies. [ABSTRACT FROM AUTHOR]

The papers in this issue continue with the tradition of adding puzzles pieces to the overall picture of the impact and importance of firm international activities. In "What makes a successful exporter?", we have collected twelve papers, the majority of which were presented at the 13th annual ISGEP workshop in Ljubljana, Slovenia on 20–21 September 2018. The common thread linking these papers is that they explore both what it means to be an exporter and the ramifications of exporting on firms and the economy as a whole. On the one hand, this special issue addresses the role of foreign sourcing, export experience in the board of directors and credit supply shocks on the propensity to export, as well as the factors that affect firms' overall readiness to export. On the other hand, it investigates various measures of performance in the export markets, such as export duration, markups, quality upgrading and product mix. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editor discusses various reports within the issue on topics including one by Xianhai Huang, Sheng Xu and Jing Lu on the Chinese economy, another by Anders C. Johansson on the movement of the East Asian and European equity markets during the global financial crisis in 2008-2009, and one by Xinhua Gu and Baomin Dong on the relationship between capital flows and volatility.

The paper offers a detailed review of African firms' participation to international value chains and provides new quantitative insights on two countries, Cameroon and Ivory Coast, based on a unique dataset, which was obtained by merging firm census and detailed customs transactions over time. "GVC firms" are defined as firms that both export and import, with positive production and labour. The paper characterises GVC firms in the two countries. GVC firms represent about 15% of manufacturing firms; they are more frequent than pure exporters, a sign of the challenges faced by firms in those countries if they want to sell abroad. In line with the literature on firm heterogeneity and trade, firms engaged in GVCs are larger, more productive and live longer than one‐way‐traders or domestic firms. African markets are the main destination of manufacturing GVCs in Ivory Coast, while Cameroon GVC firms rely on OECD (including for agricultural exports). There is limited cross‐penetration between African‐oriented and OECD‐oriented GVC firms over time. The probability of moving into a GVC is higher for exporters than for importers, showing that exporting is a stepping stone for African firms to join a GVC. [ABSTRACT FROM AUTHOR]

This paper investigates tax‐related determinants of indirect foreign direct investment (FDI). In particular, it studies the effects of bilateral effective average tax rates, the strength of anti‐tax avoidance rules in host countries and tax haven status of home countries on the volume of indirect FDI host countries receive. The paper uses the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment (BMD4) database, which distinguishes between ultimate and immediate FDI. Methodologically, the paper relies on the standard gravity equation for FDI and applies the Poisson pseudo‐maximum likelihood estimation model. The paper shows that ultimate FDI is not influenced by tax‐related factors but only real economic determinants, whereas tax rates affect immediate FDI. This finding suggests that previous research may have overestimated the tax elasticity of FDI, and taxes do not have an impact on location decisions of FDI, but rather the route of investing—direct or indirect. The paper defines indirect FDI as the difference between ultimate and immediate FDI and finds that high bilateral effective average tax rates encourage indirect FDI. The finding is robust under different specifications. [ABSTRACT FROM AUTHOR]

This paper studies the direct and indirect trade volume and trade cost effects of uncertainty on international trade and economic welfare using a structural gravity framework for a panel of 97 developed and developing countries from 2000 to 2018. We find that the sign and magnitude of the effect depend on whether uncertainty originates from the importing or exporting country. Moreover, applying a cross‐sectional gravity model, we show that an uncertainty shock directly reduces cross‐border trade flows. The paper illustrates the suitability of the proposed modelling approach by means of two counterfactual scenario analyses in which we calculate the general equilibrium trade and welfare effects of uncertainty induced by the unexpected outcome of the Brexit referendum in 2016 and the outbreak of the COVID‐19 pandemic in 2020. [ABSTRACT FROM AUTHOR]

This Special Issue brings together 13 papers that examine a variety of central topics in the field of international economics and finance. These papers were presented at the 23rd Conference on International Economics held in Málaga (Spain) on 16th–17th June 2022. The conference was organised by the Spanish Association of International Economics and Finance (AEEFI) and the University of Málaga. The selected papers make up an interesting and revealing set of information to study the new challenges of the international economics and finance in a context especially marked by the aftermath of the 2008 financial crisis, the climate change, the challenge posed by the COVID‐19 crisis and the instability unleashed after the invasion of Ukraine in 2022. From different perspectives, the papers analyse how events that have particularly affected the evolution of the world economy have substantially altered the rules of international trade, foreign direct investment, as well as monetary, fiscal or sectoral policy. The conference included two keynote lectures by Per Krusell (Institute for International Economic Studies, Stockholm University) and Fabio Canova (Norwegian Business School and Budapest School for Central Banking Studies), as well as 97 selected contributions. [ABSTRACT FROM AUTHOR]

On the positive side, the authors are interested in the way the pandemic increases trade costs, increases firm risk, and the way firms might respond to those shocks. The next part of the normative section leaves the firm-level analysis (and pretty much leaves value chains) to discuss the question of essential goods and the appropriate policy response to shortfalls in such goods in time of crisis. The 2008-2009 global financial crisis was a once-in-a-century financial shock; COVID-19 has been a once-in-a-century public health shock. The papers in the Special Issue are obviously not the last word on the trade and trade policy effects of COVID-19, but do provide valuable insights into impact effects and set out agendas for future research. [Extracted from the article]

The dominance of large resource‐rich hegemonic economies, most notably Nigeria and South Africa, with extensive trade and possible financial linkages, exposes other Africa countries to intra‐regional spillovers. However, this strand of empirical analysis remains largely unstudied, as extant studies are mostly devoted to investigating the implications of external (global) shocks. This paper contributes to the existing literature by investigating the extent to which shocks to economic growth in Nigeria and South Africa spillover to three regional bodies, namely Central African Economic and Monetary Union (CEMAC), Southern African Development Community (SADC) and Economic Community of West African States (ECOWAS). The paper distinguishes between trade and financial channels to identify these growth spillovers by using a two‐step FAVAR model. The results of the empirical analysis show that the trade channel is effective for growth spillovers from Nigeria and South Africa to the three regional blocs. However, we find no evidence of growth spillover from the financial channel, except between South Africa and the SADC region. The paper postulates that although the total intra‐African trade remains low, it remains an important channel for growth spillover in the continent. Thus, any initiative, such as the African Continental Free Trade Area (AfCFTA) should be encouraged, to expand trade in the continent. [ABSTRACT FROM AUTHOR]

This paper examines the dependence structure between oil futures with other major commodities including gold, copper, zinc, aluminium, rubber, corn, cotton and sugar in China. To this end, we apply the extreme value theory (EVT) and dynamic copula approach, which allows for measuring both average and tail dependence. Contrary to the findings in the literature on stock markets, this paper reveals significant right tail dependence rather than left tail dependence between oil futures and most of the other eight commodities. These findings provide a new insight regarding the behaviour of oil and other major commodities. This paper thus has some significant implications for investors, risk managers and policymakers. [ABSTRACT FROM AUTHOR]

This paper explores the link between innovation, migration and Foreign Direct Investment (FDI) empirically within a theoretically consistent framework. It analyses how migrant inventors enhance multinational firms' adaptive innovation performance and ultimately foster FDI towards the migrant's country of origin. Foreign migrant inventors (migrants who filed a patent in their host country) possess a unique mix of technical knowledge and cultural background that contribute to adapting Research and Development (R&D) activities for foreign markets. Therefore, FDI increases in country‐pair‐sectors with specific endogenous investment in quality, which depends on the migrants in the R&D sector. We constructed a novel panel country‐sector data set including FDI, patents and migrant inventors and applied a two‐stage structural gravity estimation procedure using migrant inventors as a valid instrument for patents. The results show sizable effects on the extensive and intensive margins of greenfield FDI. [ABSTRACT FROM AUTHOR]

This paper studies the impact of export VAT rebates on firm productivity with Chinese firm‐product‐level data. We find that higher VAT rebates significantly raise firm productivity. The results are robust to various estimations of firm productivity. Moreover, this paper finds that the impact of export VAT rebates on firm productivity is significantly different across firms and sectors. More specifically, our results suggest that the impact is mainly driven by firms with small export intensive margins and large export extensive margins, new exporters, financially constrained firms and low‐productivity firms. Furthermore, in high‐tech sectors, the impact is significantly large with a one percentage point increase of firm rate of VAT rebates nearly raising firm productivity by 6%. [ABSTRACT FROM AUTHOR]

The post‐1945 global trading system was designed around the principle of non‐discrimination. During the 1947–94 GATT era, regionalism and multilateralism were often viewed as antagonistic approaches to international trade, and preferential treatment within regional blocs was to be deterred. Since 1995, although regional trade agreements are monitored by the WTO Secretariat and presented as a threat to the system, regionalism poses little threat to the multilateral trading system. This paper argues that major twenty‐first century RTAs go beyond preferential tariff treatment to focus on deeper integration issues. Such issues are addressed outside the WTO because, despite new features of the international trade map since 1995 such as Internet use and global value chains, extension of WTO rules has proved difficult due to the requirement for consensus. The paper analyses the rise of megaregional agreements such as CPTPP and RCEP, the shift in EU policy from protecting domestic producers to facilitating imports from best global suppliers and the use of WTO plurilateral agreements within the context of providing rules fit for purpose in the modern global trading system. [ABSTRACT FROM AUTHOR]

World trade contracted dramatically during the global economic crisis induced by the COVID‐19 pandemic. Disruptions in international supply chains were widely reported as governments imposed containment measures (lockdowns) to halt the spread of the disease. At the same time, demand declined as households and firms scaled back spending. This paper attempts to disentangle the supply and demand channels in trade by quantifying the causal effect of supply spillovers from lockdowns. We utilise a novel dataset of daily bilateral seaborne trade and design a shift‐share identification strategy that leverages geography‐induced cargo delivery lags to track the transmission of supply disruptions across space. We find strong but short‐lived supply spillovers of lockdowns through international trade. Moreover, the evidence is suggestive of the downstream propagation of countries' lockdowns through global supply chains. The short‐lived nature of the disruptions despite the unprecedented scale of the shock caution against any blunt use of trade and tax policies to create costly redundancies in global supply chains. [ABSTRACT FROM AUTHOR]

In this study, we analyse China's foreign trade performance under the global COVID‐19 pandemic using the monthly data in 2019–2021. This paper finds that: (1) China's exports to its major trading partners recover and continue to grow in the second half of 2020 and 2021, after falling significantly in the first half of 2020; (2) the mechanical & electrical and the high‐tech industries have contributed significantly to the recovery of China's exports; (3) the exports of medical products, furniture and appliances show growth in line with the implementation of quarantine policies; (4) the exports of electronic products and electrical vehicles kept growing both before the outbreak and during the pandemic. It is posited that China should continue to expand trade with emerging markets while maintaining a steady trade volume with the developed economies. We also recommend that China focus its future export development on these industries and products that are growing steadily and have greater potential, including the mechanical & electrical industry, the high‐tech industry, electronic products and electrical vehicles. [ABSTRACT FROM AUTHOR]

This paper quantifies the economy‐wide effects of different trade policies on the Palestinian economy, using a detailed database and a general equilibrium model adjusted to the particularities of the Palestinian economy. The findings show that a liberal and non‐discriminatory trade regime provides the highest benefits for the Palestinian economy, in terms of welfare effects, GDP growth and job creation. The choice of an exchange rate regime has a considerable influence on the effects of trade policy. Accordingly, a full control over trade and monetary policy instruments could improve the capacity of the Palestinian National Authority to address the prevailing high unemployment and sluggish economic growth. [ABSTRACT FROM AUTHOR]