Marilyne Huchet-Bourdon

Sacrifice ratio dispersion within the Euro Zone: what can be learned about implementing a single monetary policy?

This article focuses on the comparison of sacrifice ratios as an indicator for structural dispersion within the euro area over the period 1972–2003. Estimates of the sacrifice ratio, defined as the cumulative output cost arising from permanent inflation reduction, are obtained using structural VAR models. Results from sub‐period analysis as well as 10‐year‐period rolling estimates lead to two main conclusions. First, empirical evidence displays a recent increase in the average sacrifice ratio, which can be linked to the simultaneous decrease in the average inflation rate: this negative relationship between the initial level of inflation and the cost of disinflation can be seen as a justification for the choice of an inflation objective close to 2% for the European Central Bank (ECB) rather than a target of perfect price stability, potentially very damaging. Second, we cannot provide evidence of any reduction in European sacrifice ratio dispersion, which would suggest that the nominal convergence triggered by the Maastricht Treaty did not involve a true reduction of structural differences. It is likely to be a problem in the stance of a single monetary policy, because structural differences imply asymmetric responses of real national economies to the same monetary impulse.

Exchange Rate Uncertainty and Trade Flows Between the United States and China

This article assesses the impact of the RMB-dollar exchange rate and volatility on U.S. agricultural exports to and imports from China. Two measures of volatility are employed: one based on the moving standard deviation of the real RMB-dollar rate, the other a GARCH-based measure which yields more significant results. We find that exchange rate volatility has a significantly positive long-run effect only on export earnings of the nonagricultural sector. On the other hand, depreciation of the dollar has an expected long-run effect on the import value of the nonagricultural sector and on export earnings of the agricultural sector. No matter which model we consider, the level of economic activity in both countries seems to be the major long-run determinant of trade flows in both directions.

Agricultural support and vulnerability of food security to trade in developing countries

Our hypothesis is that the ratio of national food import expenditures to the value of total exports may be used as a consistent indicator of food security vulnerability to trade at the national level (the Bonilla Index hereafter). In this article, we test the assumption that with the aim of stabilizing national food availability and accessibility, developing countries use policy instruments for stabilizing their Bonilla Index. Developing countries depend on farming while many price distortions remain. The nominal rate of assistance is defined as the percentage by which government policies have raised revenues to producers above what they would be without the government’s intervention (agricultural policy domestic support and border measures). After analysing the role of the nominal rate of assistance and of the exchange rate vulnerability of food security to trade, we present the Bonilla Index evolution paths of 39 developing countries from 2005 to 2010. Second, we measured the impact of their national policy responses to the 2008 price surge using the nominal rate of assistance on importable food products. Finally, we statistically tested the extent to which our qualitative hypotheses and relationships were actually confirmed by the data over the period 2005–2010. Our results suggest that most developing countries have used their possibility to play with the nominal rate of the assistance level to compensate for the effects of the 2008 food price surge and that exchange rate variations actually have little impact on food accessibility for consumers in a context of food-price volatility.

The relationship between trade openness and economic growth: Some new insights on the openness measurement issue

Empirical results on the links between trade openness and economic growth often suggest that, in the long run, more outward†oriented countries register better economic growth. However, a similar level of trade openness can hide different types of trade structures. The aim of this paper was to enrich the way of measuring trade openness taking into account two different dimensions of countries’ integration in world trade: export quality and export variety. Based on the estimation of an endogenous growth model on a panel of 169 countries between 1988 and 2014 using a generalised method of moments estimator, our results confirm that countries exporting higher quality products and new varieties grow more rapidly. More importantly, we find a non†linear pattern between the export ratio and the quality of the export basket, suggesting that openness to trade may impact growth negatively for countries which are specialised in low†quality products. A non†linear relationship between export variety, the export ratio and growth is also found, suggesting that countries increasing their exports will grow more rapidly after reaching a certain degree of the extensive margin of exports.