Mona Haddad

Are there positive spillovers from direct foreign investment?: Evidence from panel data for Morocco☆

Abstract Many developing countries now actively solicit foreign investment, offering income tax holidays, import duty exemptions, and subsidies to foreign firms. One reason for subsidizing these firms is the positive spillover from transferring technology to domestic firms. This paper employs a unique firm-level dataset to test for such spillovers in the Moroccan manufacturing sector. We find evidence that the dispersion of productivity is smaller in sectors with more foreign firms. However, we reject the hypothesis that foreign presence accelerated productivity growth in domestic firms during the second half of the 1980s. Using detailed information on quotas and tariffs, we also reject the possibility of a downward bias in estimating technology spillovers because foreign investors may be attracted to protected domestic markets.

Trade Openness Reduces Growth Volatility When Countries are Well Diversified

This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export diversification indicators, it presents strong evidence pointing to an important role for export diversification in reducing the effect of trade openness on growth volatility. The authors also identify positive thresholds for product diversification at which the effect of openness on volatility changes sign. The effect is shown to be positive only for a minority of countries with highly concentrated export baskets. This result is shown to be robust to both explicit accounting for endogeneity as well as the inclusion of a host of additional controls.

Trade integration in East Asia : the Role of China and production networks

Production networks have been at the heart of the recent growth in trade among East Asian countries. Fragmentation trade, reflected mainly in the trade in parts and components, is expanding more rapidly than the conventional trade in final goods. This is mainly due to the relatively more favorable policy setting for international production, agglomeration benefits arising from the early entry into this new form of specialization, considerable intercountry wage differentials in the region, lower trade and transport costs, and specialization in products exhibiting increasing returns to scale. The economic integration of China has deepened production fragmentation in East Asia, countering fears of crowding out other countries for international specialization. International production fragmentation in East Asia has intensified intraregional trade but has depended heavily on extraregional trade in final goods. While production networks centered on China have contributed significantly to growth in East Asia, they also breed vulnerabilities. They have not automatically led to technology spillovers and have led to an extreme interdependence across East Asian countries.

Decomposing the Great Trade Collapse: Products, Prices, and Quantities in the 2008-2009 Crisis

The authors identifies a new set of stylized facts on the 2008-2009 trade collapse that they hope can be used to shed light on the importance of demand and supply-side factors in explaining the fall in trade. In particular, they decompose the fall in international trade into product entry and exit, price changes, and quantity changes for imports by Brazil, the European Union, Indonesia, and the United States. When the authors aggregate across all products, most of the countries analyzed experienced a decline in new products, a rise in product exit, and falls in quantity for product lines that continued to be traded. The evidence suggests that the intensive rather than extensive margin mattered the most, consistent with studies of other countries and previous recessionary periods. On average, quantities declined and prices fell. However, these average effects mask enormous differences across different products. Price declines were driven primarily by commodities. Within manufacturing, while most quantity changes were negative, in most cases price changes moved in the opposite direction. Consequently, within manufacturing, there is some evidence consistent with the hypothesis that supply side frictions played a role. For the United States, price increases were most significant in sectors which are typically credit constrained.

Financial Services and Preferential Trade Agreements: Lessons from Latin America

This book deals with financial liberalization issues in the context of trade negotiations. The liberalization of trade and investment in financial services is only a subset of the broader financial liberalization agenda. The purpose of trade and investment liberalization is to increase financial market access and remove discriminatory and other access-impeding barriers to foreign competition. By contrast, the main purpose of financial liberalization is to remove distortions in domestic financial systems that impede competition and the allocation of capital to its most productive and profitable uses. In turn, financial liberalization can be divided into domestic financial reform and capital account opening, and there is a rich literature on its appropriate speed and sequencing. The first part of the book covers the fundamental principles that affect trade liberalization in financial services at both the multilateral and the regional levels. It analyzes the various models of preferential trade agreements (PTAs) used by negotiators and the architectural differences of these models. The second part of this book provides concrete examples of how countries have negotiated these agreements by focusing on the specific country experiences of Chile, Colombia, and Costa Rica. These case studies provide the reader with a thorough understanding of how countries strategize, negotiate, and implement regional trade agreements in financial services.