Christopher Johann Kurz

Trade, production sharing, and the international transmission of business cycles ☆

Abstract Countries that are more engaged in production sharing exhibit higher bilateral manufacturing output correlations. We use data on trade flows between US multinationals and their affiliates as well as trade between the United States and Mexican maquiladoras to measure production-sharing trade and its link with the business cycle. We then develop a quantitative model of international business cycles that generates a positive link between the extent of vertically integrated production-sharing trade and internationally synchronized business cycles. A key assumption in the model is a relatively low elasticity of substitution between home and foreign inputs in the production of the vertically integrated good.

Outstanding Outsourcers: A Firm- and Plant-Level Analysis of Production Sharing

This paper examines the differences in characteristics between outsourcers and nonoutsourcers with a particular focus on productivity. The measure of outsourcing comes from a question in the 1987 and 1992 Census of Manufactures regarding plant-level purchases of foreign intermediate materials. There are two key findings. First, outsourcers are “outstanding.” That is, all else equal, outsourcers tend to have premia for plant and firm characteristics, such as being larger, more capital intensive, and more productive. One exception to this outsourcing premia is that wages tend to be the same for both outsourcers and non-outsourcers. Second, outsourcing firms, but not plants, have significantly higher productivity growth.

That's Where the Money Was: Foreign Bias and English Investment Abroad, 1866-1907

Why did Victorian Britain send so much capital abroad? We collect over 500,000 monthly British and foreign security returns between 1866 and 1907 and investigate the effect of international diversification on Victorian investors’ portfolios. This is the first study to use nineteenth-century data that is both broad enough and sampled at a high enough frequency to examine if foreign assets expanded the mean-variance efficient frontier of British investors and how valuable this expansion was in terms of utility. We find that foreign assets significantly expanded the mean-variance frontier and resulted in utility gains equivalent to large increases in wealth.

Offshoring Bias in U.S. Manufacturing: Implications for Productivity and Value Added

The rapid growth of offshoring has sparked a contentious debate over its impact on the U.S. manufacturing sector, which has recorded steep employment declines yet strong output growth--a fact reconciled by the notable gains in manufacturing productivity. We maintain, however, that the dramatic acceleration of imports from developing countries has imparted a significant bias to the official statistics. In particular, the price declines associated with the shift to low-cost foreign suppliers are generally not captured in input cost and import price indexes. Although cost savings are a primary driver of the shift in sourcing to foreign suppliers, the price declines associated with offshoring are not systematically observed; this is the essence of the measurement problem. To gauge the magnitude of these discounts, we draw on a variety of evidence from import price microdata from the Bureau of Labor Statistics, industry case studies, and the business press. To assess the implications of offshoring bias for manufacturing productivity and value added, we implement the bias correction developed by Diewert and Nakamura (2009) to the input price index in a growth accounting framework, using a variety of assumptions about the magnitude of the discounts from offshoring. We find that from 1997 to 2007 average annual multifactor productivity growth in manufacturing was overstated by 0.1 to 0.2 percentage point and real value added growth by 0.2 to 0.5 percentage point. Furthermore, although the bias from offshoring represents a relatively small share of real value added growth in the computer and electronic products industry, it may have accounted for a fifth to a half of the growth in real value added in the rest of manufacturing.

Ricardian Trade and the Impact of Domestic Competition on Export Performance - Commerce Ricardien Et L’Impact De La Concurrence Intérieure Sur La Performance Du Secteur Des Exportations

This paper develops and empirically examines a model of relative productivity differences both within and across industries for small open economies. We decompose the effect of industry productivity on export performance into direct effect of own‐firm productivity and an indirect effect of higher peer‐firm productivity. In a sample of Chilean and Colombian plants, we find evidence of both a positive direct effect and a negative indirect effect. The empirical evidence supports our theoretical prediction that industry‐specific factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect effect. Ce memoire developpe et examine empiriquement un modele des differences de productivites relatives, a la fois a l’interieur et entre les industries, pour des petites economies ouvertes. On decompose l’effet de la productivite industrielle sur la performance du secteur des exportations en un effet direct de la productivite de la firme particuliere, et un effet indirect de la productivite des autres firmes dans l’industrie. Dans un echantillon d’etablissements au Chili et en Colombie, on decouvre a la fois un effet direct positif et un effet indirect negatif. Le travail empirique supporte les predictions theoriques a savoir que les facteurs de production specifiques a l’industrie et la substituabilite asymetrique entre les varietes domestiques et etrangeres de produits sont au fondement de cet effet indirect.

Back to the Future: Backtesting Systemic Risk Measures during Historical Bank Runs and the Great Depression

We evaluate the performance of two popular systemic risk measures, CoVaR and SRISK, during eight financial panics in the era before FDIC insurance. Bank stock price and balance sheet data were not readily available for this time period. We rectify this shortcoming by constructing a novel dataset for the New York banking system before 1933. Our evaluation exercise focuses on two challenges: the ranking of systemically important financial institutions (SIFIs) and financial crisis prediction. We find that CoVaR and SRISK meet the SIFI ranking challenge, i.e. help identifying systemic institutions in periods of distress beyond what is explained by standard risk measures up to six months prior to panics. In contrast, aggregate CoVaR and SRISK are only somewhat effective at predicting financial crises.