Stephen S. Golub

Oil Prices and Exchange Rates

The quotations show a sharply divergent pattern in the response of the foreign exchange market to announcements of oil price increases. During the first oil shock, news about oil price rises led to a strengthening of the dollar, whereas during the I979 surge of oil prices the reverse was generally true. When the news was not so bad as feared the dollar fell back in I974, but rose in I979. In 1980 the pattern shifted once again, back to dollar appreciation. Is there a rational fundamental explanation for the behaviour of the foreign exchange market, or is it a matter of traders responding to what other traders arbitrarily think? It is difficult to resolve this question, but some insight can be provided through an analytical examination of the relationship between oil price increases and exchange rates. The paper begins with a theoretical framework for analysing the relation between oil prices and exchange rates, and then uses the theory to explain the behaviour of the foreign exchange market.

Policies and International Integration: Influences on Trade and Foreign Direct Investment

Cette etude evalue l’importance des politiques frontalieres et non-frontalieres pour l’integration internationale. L’accent est place sur quatre mesures largement preconisees: suppression des restrictions explicites aux echanges et a l’IDE ; encouragement de la concurrence au plan interne ; amelioration de la capacite d’ajustement des marches du travail; et mise en place de niveaux adequats d’equipements d’infrastructure. L’analyse, qui couvre l’IDE et les echanges de biens et de services, prend ainsi en compte les principaux mecanismes de mondialisation et traite de la plupart des modes de fourniture de services transfrontieres. L’etude analyse d’abord les tendances du commerce, de l’IDE et des politiques dans les quatre domaines examines, en utilisant un vaste ensemble d’indicateurs de politiques structurelles recemment assemble par l’OCDE, qui comprend les nouveaux indicateurs de restrictions a l’IDE decrits par Golub (2003). Elle estime ensuite l’impact de ces politiques sur ...

Classical Ricardian Theory of Comparative Advantage Revisited

According to the classical Ricardian theory of comparative advantage, relative labor productivities determine trade patterns. The Ricardian model plays an important pedagogical role in international economics, but has received scant empirical attention since the 1960s. This paper assesses the contemporary relevance of the Ricardian model for US trade. Cross-section seemingly unrelated regressions of sectoral trade flows on relative labor productivity and unit labor costs are run for a number of countries vis-a-vis the United States. The coefficients are almost always correctly signed and statistically significant, although much of the sectoral variation of trade remains unexplained. Copyright 2000 by Blackwell Publishing Ltd.

International Capital Mobility: Net Versus Gross Stocks And Flows

Abstract Feldstein and Horioka (1980) observed that net capital flows have been small in relation to domestic saving and investment flows for OECD countries in the post-war period, which they interpreted as evidence of low capital mobility. This paper argues that the correlation between gross domestic and international financial flows can be a better indicator of capital mobilitythan net capital flows. Contrary to the conventional wisdom among international economists, gross flows have been small in relation to gross domestic asset creation for OECD countries, although by this measure the degree of capital mobility increased in the 1980s.

International Productivity Differences, Infrastructure, and Comparative Advantage

This paper provides an empirical analysis of the effect of infrastructure provision on industry-level productivity and international specialization, as suggested by Clarida and Findlay’s (1992) model. We calculate total factor productivity (TFP) for 18 developed and developing countries and 10 manufacturing industries, and study the effects of supplies of roads, telecommunications and electric power on international variations in sectoral TFP, i.e. comparative advantage. We also examine the effects of infrastructure on the sectoral composition of output across countries. Using a three-stage least-squares estimation strategy to control for endogeneity of infrastructure provision, we find that infrastructure, especially roads, helps to explain patterns of comparative advantage and international specialization.

Openness to Foreign Direct Investment in Services: An International Comparative Analysis

This paper quantifies and analyses the extent of restrictions on inward foreign direct investment (FDI) in the service sector in developed and developing countries. Services account for an increasing share of global FDI. Recognition of the economic benefits of FDI clashes with nationalistic economic, political and national security concerns about foreign takeover of ‘strategic’ sectors, such as telecommunications, finance and transport. Consequently, almost all countries impose restrictions on FDI in services. Several different types of restrictions are considered: limitations on foreign ownership, screening or notification procedures, management restrictions and operational restrictions. These restrictions on FDI are computed at the industry level and then aggregated into a single measure for the service sector as a whole for 23 developed and 50 developing countries. Notwithstanding the worldwide trend towards liberalisation of restrictions, there remain substantial disparities between regions and individual countries in the severity of restrictions on inward FDI in services. The lowest restriction scores are in Europe and Latin America, whereas East Asia, South Asia and the Middle East have the highest levels of restrictions. The evolution over time of FDI restrictions is also presented for developed countries over the period 1981–2005, showing liberalisation in all countries, especially since the early 1990s, although to varying extents across countries. The severity of restrictions also differs considerably by sector, with electricity, telecommunications, transport and finance most restricted. The paper also finds a strong negative correlation of restrictiveness with inward stocks of FDI in services, suggesting that restrictions impede FDI.

Globalization and Country-Specific Service Links

Abstract The Jones–Kierzkowski model of global fragmentation of production draws attention to the efficiency of ‘service links’ connecting ‘production blocks’ in different countries. Country‐specific service links include transport and telecommunications infrastructure and the overall business climate. Mobile factors of production, most prominently foreign direct investment (FDI), can shop around for countries with the most functional and inexpensive service links along with low labor costs. Those countries with favorable business climates and well‐functioning service links are able to attract FDI and other mobile inputs. We provide cross‐sectional evidence that successful exporters of manufactures, notably in East Asia, have relatively favorable service links.

Does China Still Have a Labor Cost Advantage

Abstract In recent years wages in China have been rising and the yuan has appreciated, potentially eroding China’s cost advantage in manufactures. This paper explores the evolution of China’s relative unit labor costs in manufacturing over 1998-2009. Between 1998 and 2003 China’s unit labor costs fell, but since 2003 they have increased both absolutely and relative to US unit labor costs. Much of the rise in China’s relative unit labor costs can be traced to a real appreciation of the yuan against the dollar. Despite the recent rise, China’s unit labor costs remain low relative to those in most other countries.

Just How Low are China's Labour Costs?

This paper provides a new perspective on Chinese international competitiveness in manufacturing using relative unit labour costs. We find that Chinese unit labour costs are about 25-40 per cent of US labour costs. They are also low relative to costs in the EU, Japan, Mexico, Korea and most other newly industrialising countries. However, Chinas relative unit labour costs indicate a substantially smaller cost advantage than that implied by a comparison of wages alone. Chinas cost advantage derives from large currency devaluations that preceded the establishment of a de facto peg around 1995, and rapid productivity growth in the period since 1995. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd .

International Labor Standards and International Trade

This paper reviews controversies regarding linkage of international trade and labor standards. Pressures for international harmonization of labor standards arise in the context of increased trade between countries with large disparities in wages, and also reflect the history of labor standards. A critical distinction is made between standards related to fundamental human rights and those related to employment conditions. The main conclusion is that trade sanctions to enforce labor standards should not be an option, but that international agreements on core labor standards, with voluntary compliance, may, apart from being worthwhile on ethical grounds, defuse calls for protection.