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Social and Behavioral Sciences Commons™
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Articles 1 - 3 of 3
Full-Text Articles in Social and Behavioral Sciences
Intra-Industry Trade And The Open Economy, Sven W. Arndt
Intra-Industry Trade And The Open Economy, Sven W. Arndt
CMC Faculty Publications and Research
This paper explores the implications of cross-border production networks and vertical intra-industry trade for macroeconomic adjustment and for the effectiveness of monetary and fiscal stabilization policies. Vertical intra-industry trade introduces direct links between countries’ imports and exports and thereby affects the manner in which trade balances respond to variations in exchange rates and to global shocks more generally. The precise effects depend on whether the direct link runs from exports to imports or vice versa. In the U.S., for example, exports of auto parts and components rise with an increase of imports of passenger vehicles from Mexico. This produces a …
Trade, Production Networks And The Exchange Rate, Sven W. Arndt, Alex Huemer '99
Trade, Production Networks And The Exchange Rate, Sven W. Arndt, Alex Huemer '99
CMC Faculty Publications and Research
This paper examines the effect of cross-border production sharing on trade and exchange-rate behavior. When a country’s exports contain imported components, changes in exchange rates tend to have offsetting effects on imports and exports. Imports may fall, remain unchanged or even rise with depreciation, depending on the share of domestic value-added in exports. The effect of domestic and foreign GDP on imports and exports is also altered by production sharing. These behavior patterns are identified in trade in motor vehicles between the United States and Mexico with the aid of OLS and VEC techniques.
Trade Diversion And Production Sharing, Sven W. Arndt
Trade Diversion And Production Sharing, Sven W. Arndt
CMC Faculty Publications and Research
This paper examines the repercussions of cross-border production sharing for the welfare effects of preferential trade liberalization. In a general-equilibrium context, a free trade agreement (FTA), which incorporates production sharing, raises the likelihood of welfare improvement. Thus, two members of a free trade area, who each have comparative disadvantage in the production of a final product relative to a non-member, may nevertheless enjoy net trade creation if they jointly possess comparative advantage in key components of that product. At a minimum, cross-border production sharing reduces the trade-diverting elements of an FTA. It follows, that rules of origin, viewed as constraints …