This dissertation combines theoretical modeling and empirical analysis in macroeconomics, with a focus on open economies. It contains three chapters that study macroeconomic dynamics in the presence of credit frictions and the scope for stabilization policies in this context. Chapter 1, "Macroeconomic Effects of Commodity Booms and Busts: The Role of Financial Frictions", studies the real effects of commodity price shocks in small open commodity exporters; and the role of financial frictions in the transmission of these shocks to economic activity. I begin by estimating a panel VAR system for two groups of countries heavily exposed to commodity goods exports, one containing only advanced small open economies, and the other only emerging small open economies. I show that commodity price shocks are important sources of business cycle fluctuations, and have stronger effects on real activity, credit, and country interest rate in emerging countries. Motivated by these results, I construct a multi-sector open economy model with a banking sector to gauge the importance of different financial frictions in the transmission of commodity price shocks. I find that the main transmission channel is the interaction between the differences in working capital constraints at the firm level and the effect of commodity prices on the country interest rate. Moreover, I show that the financial accelerator and balance sheet mismatches in the banking sector don't have a relevant quantitative amplification effect. Chapter 2, "International Reserves, Credit Constraints, and Systemic Sudden Stops", analyzes the puzzling fact that emerging markets hold very high levels of international reserves and foreign liabilities simultaneously. Moreover, these holdings are positively correlated, which leads to an income loss that might reach 2% of GDP per year. To address this issue, I propose a new motive for international reserves accumulation, namely its role as implicit collateral for external borrowing. In this context, I evaluate whether the role of international reserves as collateral can explain the high levels of international reserves that we see in practice and find that the optimal level is close to the average reserves-to-GDP ratio in Latin American countries. Additionally, the optimal behavior during crises implies an increase of reserve holdings before a Sudden Stop and a small reduction during it, which is coherent with what was observed in the recent Global Financial Crisis. Finally, an alternative policy of keeping reserves at a constant level equal to its average value all the time yields very similar result to the optimal policy during sudden stops, highlighting the stabilizing role of reserves even if Central Banks don't use them at all. Chapter 3, "The Real Consequences of Countercyclical Capital Controls'', coauthored with Savitar Sundaresan, analyzes the effects of capital controls on real activity in Brazil, the most preeminent case of controls being imposed countercyclically. We find that capital controls have a significant negative impact on investment. The macro analysis uses a synthetic control method and finds that investment could have been approximately 20% higher if controls had not been put in place. The micro analysis uses a panel data approach and finds that the controls reduced the investment to assets ratio by as much as 40%, with some of its effects mitigated by the extension of subsidized credit by the government through the development bank. These results indicate that the renewed support for controls since the Great Financial Crisis should be more cautiously evaluated as it might harm the potential growth rate of Emerging Economies for a long-lasting period.

I study bailout policy in open economies and the relationship between openness and institutions. Chapter 1 studies jointly optimal bailout policy and monetary policy in open economies. I document that countries with larger foreign currency liability/GDP ratio before financial crises underwent larger currency devaluation, inflation and bailout in crises. I build a quantitative open economy model with both nominal rigidities and financial frictions. Using the model, I show that in a world without bailout while currency mismatch effect is present, larger foreign currency liability before crises calls for smaller currency devaluation in crises, embracing the notion of ``fear of floating''. The incorporation of optimal government bailout, whose cost needs to be financed by inflation tax, can overturn the above negative relationship between foreign currency liability and currency devaluation, delivering results consistent with the empirical findings. Finally, I use firm level data to show that whether firms suffer from currency mismatch effect or not during crises hinges on their chance of obtaining bailout. Chapter 2 examines the joint dynamics of private and public external debt for countries. We develop a model with the co-occurrence of banking crisis and sovereign debt crisis in open economies, formalizing Reinhart and Rogoff (2011) findings ``from financial crash to debt crisis". External interest rate spikes or sudden stop shocks force banks to cut down debt position and fire-sale capital. The existence of frictions in bank equity market creates incentives for the government to initiate a bailout. The government bails out banks by increasing external borrowing and implementing fiscal austerity to undo inefficiencies in the private sector. Under optimal bailout scheme, the model generates diverging external debt dynamics for the private sector and the government during a crisis, as we document in the European data. Finally, we investigate two rationales for ex-ante macro-prudential regulations on private external debt: fire-sale externalities between banks and moral hazard by banks.Chapter 3 (joint with Shang-Jin Wei) explores the relationship between openness and institutions. Quality of public institutions has been recognized as a crucial determinant of macroeconomic outcomes. We propose that a country's intrinsic level of openness (due to population size, geography, or exogenous trade opportunities) affects its incentives in investing in better institutions. We present a simple theory and extensive empirical evidence validating the role of intrinsic openness in determining institutional quality. This suggests an indirect but important channel for globalization to improve welfare by raising the quality of institutions.

Many scholars primarily view international organizations as vehicles used by powerful states to distribute resources. However, this view trivializes the profound influence of their day-to-day operations on the world. This dissertation argues that that the classification systems developed by these bureaucracies significantly affect how classified countries are treated by many influential elites in the global economy. Focusing on the domain of development, I show that whether a country is categorized as a developing country has major effects on high-stakes decisions such as aid, investment, and credit and democracy ratings. Why do international observers rely so heavily on these blunt categories? I propose two mechanisms by which classifications influence elite behavior: Elites may use classifications cognitively as heuristic devices that simplify decision-making processes or strategically as a way of justifying their behaviors to external audiences. I then show with cross-national data from 1987 to 2015 that a country's World Bank income classification correlates with the rewards it receives from actors who are susceptible to one or both of these mechanisms. Specifically, I find that becoming a middle income country causes a country to lose aid but receive better ratings of its creditworthiness and democracy. These findings are echoed in interviews with stakeholders in the graduation processes of several countries within a World Bank system. I test the micro-foundations of my theory with experimental data by inviting an elite sample of development professionals and students to participate in a hypothetical aid allocation activity. By randomizing the information included on the country profiles and the participation incentives, I show both that a classification effect exists and that, in the case of donors, it is primarily driven by the strategic mechanism. Coupled with the observational findings, which illustrate that classifications affect investors and raters with no such strategic incentives, this suggests that both mechanisms are essential to understanding who uses classifications. How do these dynamics affect the experiences and behaviors of classified countries and groups within those countries? I argue that classifications produce winners and losers, who strategically respond to their classifications when able and informed. In particular, being categorized as a more developed country punishes non-governmental organizations and those they represent, while business interests and individual leaders benefit materially and socially. I illustrate these patterns through dozens of interviews with representatives from civil society, the business community, and government in Nepal and Botswana, two countries that are currently or have previously "graduated" from the UN's Least Developed Country category. Moreover, I provide qualitative and quantitative evidence that countries use a variety of strategies to attempt to change their classifications, and they do so in both directions. For example, I show that countries manipulate their data as they approach significant thresholds that separate categories, and while some seek to accelerate their transition, others try to hinder it. This project identifies and explains a relatively unexamined power of international organizations in a context where its deployment significantly affects outcomes for developing countries. Classifications affect the highest level of interactions in ways that are felt by the poorest in society. As numerous countries begin to graduate from their developing country statuses, these findings are especially relevant for ongoing policy debates about how international organizations spread their understandings of development. Far from merely describing the world, these bureaucrats shape it in profound ways.

This dissertation contains three essays in International Macroeconomics. The first two chapters study clustered sovereign defaults, the default events where multiple countries default in a relatively short period of time. In spite of the fact that clustering of defaults is a recurring phenomenon, there is a lack of empirical as well as quantitative research focusing on clustered defaults. Therefore, the first two chapters try to uncover the the nature of shocks and the mechanism through which these shocks lead countries to clustered defaults. The first chapter uses the data on 146 sovereign defaults from 1975 to 2014 and categorizes one-third of these defaults as clustered default episodes. It then asks if the nature of shocks that drive clustered defaults differ from those that drive idiosyncratic defaults. I find that global variables, global shocks to transitory component of output of the countries and world interest rate fluctuations, play a crucial role in predicting clustered default events: for clustered default episodes, the predicted probability of default goes up by two-and-a-half times after the inclusion of global variables as explanatory variable. Idiosyncratic defaults, on the other hand, are not influenced by the presence of global variables as explanatory variable in the specification, and the predicted probability of default remains unchanged. Motivated by the finding of the first chapter, the second chapter builds a quantitative framework to study clustered defaults. The chapter begins with a joint estimation of structural parameters that drive the output process of 24 countries and a process for the world interest rate. The postulated output process includes transitory and permanent global components, as well as transitory and permanent country-specific components. I then build a sovereign default model augmented with financial frictions at the firm level. The model and the estimation process of driving forces are validated jointly when the shocks, estimated independently of the model or of default data, are fed into the model and the model reproduces the clustered default of 1982. The two main findings of the chapter are: (1) the primary driver of clustered defaults is global shock to the transitory component of output; and (2) contrary to what is commonly believed, the Volcker interest rate hike was not a decisive factor for the 1982 developing country debt crisis. The third chapter looks at one of the key financial frictions in emerging and poor economies—the presence of credit constrained households—and the way they affect consumption-to-output volatility ratio in these countries. A higher than one ratio of consumption-to-output volatility in emerging and poor countries is at odds with the observation that emerging and poor countries are also the countries where a big fraction of consumers do not have access to financial services. This is because consumers with no access to financial services cannot smooth consumption and can only have a consumption volatility to output volatility ratio of one. Therefore, in the presence of credit constrained households, the consumption volatility to output volatility ratio in the theoretical models should move closer to one rather than going up and away from one. This chapter, therefore, incorporates credit constrained households in an augmented real business cycle (RBC) model to study their effect on economic fluctuations in a set on 75 countries.

The study of technological innovation covers a broad range of issues. Everything, from the public funding of science, research policy to the role of universities, from the business development of new products and services, the financing of innovation, institutional arrangements through to the spatially located conditions that promote innovation has been considered by analysts. Mostly these subject matters have been conceptualised as components of 'national’ systems of innovation even when studied at different spatial levels (including regions and clusters). The emphasis of systems research is that places (nations or localities), within the global economic landscape, are especially important for the creation, spread and use of innovations. The systems perspective on innovation encourages, due to results on the development of endogenous capabilities and the proximity of knowledge spillovers, a view that production and innovation geographies are enclaves of activity, innovating largely in isolation from what is occurring in other technologically isolated systems. A central concern in the present thesis is that this view of national and sub-national systems does not provide a sufficiently comprehensive perspective on the global architecture of production. The primary goal is to begin to develop an innovation systems framework that combines the consideration of the advantages of individual spatial entities (clusters) with an analysis of value chains as they extend across regional and national borders. To achieve this, the analysis focuses on evaluating the role, scale and spatial structure of inter-cluster linkages. The literature on role of interdependencies within clusters suggests that user producer and tacit knowledge flows are more important for innovation than traded interdependencies. To aid the analysis of the scale and spatial structure of interdependencies and rather than be restricted by case studies methods which would facilitate analysis of only one or two clusters, two inter-country input-output datasets covering nine OECD countries (33 sectors) and fifteen European Union countries (25 sectors) were developed for the research project. To analyse these datasets in a manner that was consistent with the goals of the research new modelling software was constructed. The analysis of these spatial structures reveals that substantial associations exist between some clusters, with most national clusters maintaining one important connection. The analysis reveals differences in the global architecture of production for assembly based systems (motor vehicles and aerospace) when compared to modular component based systems such as electronics and computing. Just as businesses form networks, then it seems reasonable, on the basis of the research presented here, to suggest that global production consists of networks of clusters which are organised in hierarchical circuits. This evidence supports the argument developed through the present thesis that certain elements of innovation systems can be better understood through a crossborder cluster-to-cluster framework / Doctor of Philosophy (PhD)

Bibliography: leaves 462-479. "... to provide a basis for understanding countertrade practices. In particular, however, it aims to provide assistance to trading parties to identify the problems associated with various forms of countertrade and to give them guidance in drafting countertrade contracts in the light of Australian law.".

Dissertation, Technische Universität München, 2009. / Includes bibliographical references and index.

University of Macau / Faculty of Social Sciences / Department of Government and Public Administration

No description available.

This thesis focuses on three issues pertaining to growth, development, and trade between developed and developing countries. The first essay develops an endogenous growth model that incorporates Engel’s law into the preferences. The model shows that the initial distribution of income is crucial to the outcome. A closed-economy country where most of its population is poor experiences a low rate of innovation. Income transfers from the rich to the poor can increase the effective labour supply, thereby enhancing the rate of innovation. Under free trade, only the rich benefit from trade. The poor are indifferent unless they already can afford to consume the minimum requirement of food before trade or the minimum requirement becomes affordable after trade by cheaper imported food. The initial distribution of income influences the trade patterns. Moreover, income redistribution in a free trade environment also increases the growth rate. The second essay extends the first one by assuming that the marginal product of labour of the food sector is decreasing. It shows that an increase in population may decrease the growth rate if the initial population is large relative to the productivity of the food sector. Moreover, an increase in one country’s population may reduce that country’s production share of the world’s innovation and increase its dependency on imported technology. The last essay analyzes the welfare impact of minimum-export requirements (MERs) imposed on foreign direct investments. This essay shows that MERs can be Pareto improving measures to both the source and the host countries. When offshore plants are used by parent firms to compete with domestic firms in the source country, MERs can improve the host country’s welfare by inducing the total sales in the source country to rise, thereby reducing the distortion generated by imperfect competition. The MERs can simultaneously improve the welfare of the host country by shifting profits of the foreign firms toward the local firms. If the local firms are absent, the host’s welfare may still be improved if sufficient profits from foreign operations are retained in the host country.