Catherine L. Mann

Assessing the Potential Benefit of Trade Facilitation: A Global Perspective

The relationships between trade facilitation, trade flows, and capacity building are complex and challenging to assess, both empirically and in implementation. The authors measure and estimate the relationship between trade facilitation and trade flows across 75 countries in global trade, considering four important categories: port efficiency, customs environment, regulatory environment, and service sector infrastructure. A gravity model is employed that accounts for bilateral trade flows in manufactured goods in 2000-01 between the 75 countries, using traditional factors such as GDP, distance, language, and trade areas, and is augmented by the trade facilitation measures in the four categories for each country. The results suggest that both imports and exports for a country and for the world will increase with improvements in these trade facilitation measures. Potential gains from trade facilitation reforms are predicted by using the estimated parameters. The gains from trade facilitation are presented by comparing the gains across geographical regions and trade facilitation categories, and by domestic and partner improvements. The total gain in trade flow in manufacturing goods from trade facilitation improvements in all the four areas is estimated to be

Trade Facilitation and Economic Development: Measuring the Impact

377 billion. All regions gain in imports and exports. Most regions gain more in terms of exports than imports, in large part through increasing exports to the OECD market. The most important ingredient in getting these gains, particularly to the OECD market, is the countrys own trade facilitation efforts. The detailed presentation of the results of the analysis may help inform policy decisions and capacity building choices.

The US Trade Deficit: A Disaggregated Perspective

The authors analyze the relationship between trade facilitation, trade flows, and GDP per capita in the Asia-Pacific region for the goods sector. They define and measure trade facilitation using four broad indicators. These are constructed using country-specific data for port efficiency, customs environment, regulatory environment, and electronic-business usage. They estimate the relationship between these indicators and trade flows using a gravity model. The model includes tariffs and other standard variables. The authors find that enhanced port efficiency has a large and positive effect on trade. Regulatory barriers deter trade. The results also suggest that improvements in customs and greater electronic-business use significantly expands trade, but to a lesser degree than the effect of ports or regulations. The authors then estimate the benefits of specific trade facilitation efforts by quantifying differential improvement by members of the Asia Pacific Economic Cooperation (APEC) in these four areas. Based on a scenario in which APEC members below average improve capacity halfway to the average for all members, the authors find that intra-APEC trade could increase by

Home Bias, Transactions Costs, and Prospects For the Euro: A More Detailed Analysis

254 billion. This represents approximately a 21 percent increase in intra-APEC trade flows, about half coming from improved port efficiencies in the region. Using Dollar and Kraays estimate of the effect of trade on per capita GDP, these improvements in trade facilitation suggest an increase in APEC average per capita GDP of 4.3 percent.

The Financial Structure of Startup Firms: The Role of Assets, Information, and Entrepreneur Characteristics

The paper prepares new estimates for the elasticity of US trade flows using bilateral, commodity-detailed trade data for 31 countries, using measures of expenditure and trade prices matched to commodity groups, and including a commodity-and-country specific proxy for global supply-cum-variety. Using the United Nations Commodity Trade Statistics Database (UN Comtrade) we construct bilateral trade flows for 31 countries in four categories of goods based on the Bureau of Economic Analysis’s “end-use” classification system—autos, industrial supplies and materials–excluding energy, consumer goods, and capital goods. We find that using expenditure matched to commodity category yields more plausible values for the demand elasticities than does using GDP as the measure of demand that drives trade flows. Controlling for country and commodity fixed effects, we find that industrial and developing countries have demand elasticities that are statistically significant and that generally differ between development groups and across product categories. Relative prices for the industrial countries have plausible parameter values, are statistically significant and differ across product groups, but the relative prices for developing countries are poorly estimated. We find that variety is an important variable for the behavior of capital goods trade. Because the commodity composition of trade and of trading partners has changed dramatically, particularly for imports, we find that the demand elasticity for imports is not constant. Comparing the in-sample performance of the disaggregated model against a benchmark that uses aggregated data and GDP as the expenditure variable, our disaggregated model predicts exports better in-sample but does not predict imports as well as the benchmark model.

U.S. Treasury Auction Yields Before and During Quantitative Easing: Market Factors vs. Auction-Specific Factors

This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. The empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.

Reviving Mortgage Securitization: Lessons from the Brady Plan and Duration Analysis

Using the Kauffman Firm Survey, we examine how characteristics of a startups assets, information about the startup, and entrepreneur attributes relate to financial structure at inception. Startups with more physical assets or those where the entrepreneurs have other similar businesses are more likely to use external debt in the financial structure since these assets have a high liquidation value. Startups with human capital embodied in the entrepreneur or intellectual property assets have a lower probability of using debt, consistent with the higher asset specificity and lower collateral value of these assets. Startups characterized as small, unincorporated, solo, first-time, or home-office-based are more likely to be financed by self, family and friends, and importantly through credit cards, as these have both highly specific assets and information opacity. More educated founders and non-African American founders are more likely to be financed by external sources. Controlling for other attributes of the startup, the financial structure of women-owned startups does not differ from that of other startups. Hi-tech startups financial structure differs significantly from that of startups in other business sectors.

Globalization of Venture Capital: A Product- and Asset-Cycle View: An Examination of Information Technology Ventures

Using our unique data set of every U.S. Treasury auction from May 2003 to year-end 2012, we examine the relative importance of market factors vs. auction-specific factors in auction outcomes before and after the onset of quantitative easing in March 2009. We find that prevailing market conditions known in advance of the auction, such as the fed-funds rate, the value of alternative investments (S&P), and market volatility (VIX) are all significant for the auction high-yield. Information embodied in the previous auction of a specific maturity is correlated with the auction high-yield for Bills, implying that the Bills auctions have a forecastable component. Robustness analysis suggests that the Treasury auction market is close to efficient in that the best predictor of an auction high-yield is the market yield on the matched instrument the previous day. However, even so, auction-day innovations matter. Bid-cover is generally significant with higher bid-cover negatively correlated with the auction high-yield. There is some evidence that bidder types (Primary Dealers, Indirect bidders as a proxy for foreign investors, and Direct bidders) vary in their bids, but these results are fragile and depend on model specification. With regard to pre- vs. post-quantitative easing, market structural factors (FedFunds, S&P, VIX) do appear to be differentially correlated with the auction high-yield before and after onset of QE. On balance, the policy of quantitative easing implemented in the secondary market has affected the auction market for U.S. Treasury securities.

Aid for trade facilitation

We review the period of the Latin American debt crisis in order to draw policy analogies from that experience for current U.S. credit securitization markets. During the earlier episode the Brady Plan used a zero-coupon U.S. Treasury security to provide a credit enhancement for the troubled assets. This revitalized the market for Latin American debt by: (1) ameliorating the dual solvency problem that affected both creditors and debtors, and (2) revealing asset prices as dominated by risk fundamentals rather than by short-run factors. The cost of the Brady plan was quite small relative to its social benefits. To address todays problems in some U.S. securitization markets, we argue that U.S. policymakers could implement a related form of cash flow enhancement with the potential for achieving similar outcomes. Analyzing the Brady bond credit enhancement as applied to a class of todays mortgage securities reveals that the optimal timing for the credit enhancement targets cash-flows that are somewhat distant from the present and its financial turmoil. An additional benefit of this, in both the Brady Bond case and under our proposal, is that the probability of the program sponsor needing to make payments associated with the enhancement is likely to be lower if the intervention is indeed effective. Hence, refining the timing of the suggested enhancements has two mutually-reinforcing beneficial effects; through this program, an optimally designed large-scale commitment can have a lower final cost for the tax-payer than a smaller one that is more likely to fail.

Report on the State of Available Data for the Study of International Trade and Foreign Direct Investment

Classic production models in the global economy proceed through a product cycle of innovation at home, followed by commoditization, pressure for cost minimization, and then some combination of production abroad, sales abroad, and export to the original and other foreign markets. Asset and financial market models can exhibit dramatic swings in prices and investment activity apparently caused by incomplete information and herd behavior, among other things. Investments financed by venture capital entail both a bet on a particular stage of innovative product or service as well as a flow of financial capital - hence could exhibit characteristics of both the product cycle as well as the asset cycle. This paper uses data on individual venture deals in the fast-innovating information technology sector to investigate patterns of venture finance to see whether venture capital exhibits either or both of these cycles. There is significant evidence of a product cycle based not only on both traditional theory of cost minimization, but also on more modern theories of demand patterns and technological innovation. It is hard to argue that there is not an overall internet-related asset cycle, particularly in software investment in foreign portfolio firms. There is little evidence of herding toward specific investments by product or services type or by country, although there is some evidence of herding toward later-stage investments for all countries, particularly for India.