Luciana Juvenal

Trade and Synchronization in a Multi-Country Economy

Countries with strong trade linkages have more synchronized business cycles. However, the standard international business cycle framework cannot replicate this finding, uncovering the trade-comovement puzzle. Modeling trade using more sophisticated micro-level assumptions does not help resolve the puzzle. This happens because for a large class of trade models, under certain macro-level conditions, output comovement is determined by the same factor structure. We show that in such models comovement can be explained by three factors: (i) the correlation between each countrys TFP; (ii) the correlation between each countrys share of expenditure on domestic goods; and (iii) the correlation between each countrys TFP and the partners share of expenditure on domestic goods. An empirical investigation of the link between trade and each of the three factors shows that the trade-comovement relation is in large part explained by the second factor while in the theoretical model this factor reacts counterfactually to changes in trade costs.

Export Market Diversification and Productivity Improvements: Theory and Evidence from Argentinean Firms

This paper examines the relationship between trade and investment in technology adoption when firms face demand uncertainty. Our model predicts that, for a given overall market size, exporting to several countries reduces firms demand uncertainty and, hence, raises incentives to invest in productivity improvements. The effects of diversification are heterogeneous across firms: An additional foreign market matters more for firms exporting to fewer destinations. We test the proposed theory using a large sample of Argentinean manufacturing exporters. The predictions of the model find strong support in the data.

Financial Integration, Globalization, Growth and Systemic Real Risk

Using data for a large number of advanced and emerging market economies during 1985-2009, this paper documents the dynamics of financial integration and assesses whether advances in financial integration and globalization yield the beneficial real effects resulting from a more efficient resource allocation predicted by theory. We find that: (a) financial integration has progressed significantly worldwide, within regions, and particularly in emerging markets; (b) advances in financial integration and globalization predict higher growth, lower growth volatility, as well as lower probabilities of systemic real risk realizations; (c) financial integration fosters domestic financial development and the liquidity of equity markets; and (d) the quality of institutions and corporate governance are important determinants of the levels of financial integration and globalization. Thus, financial integration and globalization appear to yield direct as well as indirect benefits in the form of improved countries’ growth prospects and lower systemic real risk.