Review of World Economics

Stoupos, Nikolaos; Kiohos, Apostolos

doi: 10.1007/s10290-020-00393-zpmid: N/A

BREXIT might be considered the most paramount event of the past 40 years in modern English history. The present research attempts to examine the impact of BREXIT referendum vote on the British financial markets. The authors examine the impact of money and capital markets on the forex markets in the UK. In their research, they utilize the ECM-Realized-EGARCH model. Their findings support that there is an excess volatility on the GBP after BREXIT vote. In particular, a momentum investing strategy crash led to the excess volatility on the UK financial markets. Finally, they found out that a further devaluation of the GBP is likely, which may lead to an additional decrease of GBP value especially against the euro and the US dollar in the near future after BREXIT.

Egger, Peter; Shingal, Anirudh

doi: 10.1007/s10290-020-00394-ypmid: N/A

Existing literature has examined factors underlying the formation of goods trade agreements (GTA) and bilateral investment treaties but not the determinants of services trade agreement (STA) membership. This paper bridges the gap by studying the economic and political determinants of STA membership. Its main contribution lies in providing an economic explanation of unilateral services regulatory provisions, embodied in the World Bank’s Services Trade Restrictiveness Index (Borchert et al. in World Bank Econ Rev 28:162–188, 2014), and their interaction with services preferentialism. The authors find that unilateral services provisions are closely associated with economic determinants. They also find that countries’ participation in STAs is correlated with the similarity of their unilateral services trade restrictiveness, a finding not observed for “goods-only” trade agreements. While geographical and cultural determinants are found to be broadly similar for GTAs and STAs, association with economic size of partners, factor endowments and services cost shares in GDP comes through more strongly for goods-only agreements.

López-Villavicencio, Antonia; Mignon, Valérie

doi: 10.1007/s10290-020-00390-2pmid: N/A

This paper addresses the impact of countries’ backward participation in global value chains (GVCs) on their current account balances. Our results, based on a large panel of 57 advanced and emerging countries, contradict the speculation that current account imbalances of countries that import intermediate products to be used in their exports, i.e., countries with important backward linkages, are likely to benefit more from GVC participation. On the contrary, the authors show that backward participation makes a negative contribution to current account balances; this result being valid for both manufactured goods and services, with a stronger impact for the latter. Overall, they find that while backward linkages may allow competitiveness gains from producing domestically and boost exports, the increase in imports of intermediates and final goods—mainly capital goods—that are not necessarily related to GVC participation, more than offset the trade balance effects of these gains.

Gräbner, Claudius; Heimberger, Philipp; Kapeller, Jakob; Springholz, Florian

doi: 10.1007/s10290-020-00391-1pmid: N/A

This paper surveys measures of economic openness, the latter being understood as the degree to which non-domestic actors can or do participate in a domestic economy. Based on the existing literature, the authors introduce a typology of openness indicators, which distinguishes between ‘real’ and ‘financial’ openness as well as ‘de-facto’ and ‘de-jure’ measures of openness. They use data collected on these indicators to analyze trends in openness over time and to conduct a correlation analysis across indicators. Finally, they illustrate the potential consequences of employing different openness measures in a growth regression framework.

Chen, Yi-Fan; Naghavi, Alireza; Peng, Shin-Kun

doi: 10.1007/s10290-020-00386-ypmid: N/A

This study proposes a model of learning by supplying in an international outsourcing framework, where the supplier of a relationship-specific input can reverse engineer and become a competitor to its partner in the final goods market. Transmitting knowledge to a more capable supplier therefore creates competitive threat despite the benefits it brings within an outsourcing relationship. In particular, in markets with less differentiated products and for standard inputs that require less knowledge to be shared, choosing an intermediate capability level supplier prompts a strategic expansion of output to deter supplier entry in the final goods market, resulting in higher profits and welfare. A highly capable supplier is instead accommodated as a rival and is a source of royalty income when the relationship-specific input embeds more knowledge about the final product and when the competing varieties are differentiated.

Cardoso, Matilde; Neves, Pedro Cunha; Afonso, Oscar; Sochirca, Elena

doi: 10.1007/s10290-020-00385-zpmid: N/A

Offshoring, either as FDI or offshore outsourcing, is a phenomenon of increasing importance that has been widely studied in the economics literature. Studies analysing the impact of offshoring on the labour market report divergent results. In this paper we develop a meta-analysis of the empirical literature that estimates the effect of offshoring on wages. We find that, after correcting for the presence of publication bias, the average effect is not significantly different from zero in either the origin or the destination countries. We also find that the wage impact of offshoring depends on methodological characteristics of the primary studies, such as the way offshoring is measured, the nature of goods/services that are offshored, the workers’ skill level, the unit of analysis, the structure of the data, and the estimation technique.

Ito, Banri

doi: 10.1007/s10290-020-00392-0pmid: N/A

This study empirically examines the causal impact of economic shocks of trade on trade policy positions by candidates who run for national elections using politician-level data of Japan during the period from 2009 to 2014. The focus of this research is an examination of how the influence of trade shocks, measured by import competition with China on politicians’ trade policy stance, is related to election pressure. The results revealed that an increase in import exposure deters candidates from supporting trade liberalization, even after considering offset by export exposure. Among other points, this protectionist effect is more pronounced for challengers than for incumbents, and for candidates who run for the Lower House election and are exposed to stronger pressures of elections than those who run for the Upper House election. Taking these findings into account, politicians who face trade shocks tend to appeal to protectionist trade policies as the pressures of elections become stronger.