A large proportion of international trade is in intermediate goods. The implications of this empirical regularity, however, have not been exhaustively explored in several aspects. The main objective of the thesis is to fill in the gap by introducing trade in intermediate goods into several strands of literature in international economics. This thesis is a collection of three essays studying the implications of trade in intermediate goods for the degree of exchange rate pass-through (Chapter 2), firms invoicing currency choice (Chapter 3) and the performance of the gravity models (Chapter 4). In Chapter 2 I present a theoretical framework and show that back-and-forth trade between two countries is associated with low degrees of aggregated exchange rate pass-through. In Chapter 3 I focus instead on firm heterogeneity in the dependence on imported inputs. I show theoretically that exporters more dependent on foreign currency-denominated inputs are more likely to price in the foreign currency. I then test the theoretical prediction using an innovative and unique dataset that covers all UK trade transactions with non-EU partners from HM Revenue and Customs (HMRC). Overall the results strongly support the theoretical prediction. Chapter 4 is a theoretical piece of work showing how the underlying trade structure alters the predictions of the gravity models. I relate gravity equations to labour shares of income. Given that these parameters are industry-specific, the results suggest that it is crucial to take them into account when the main research interest lies in sectoral differences in bilateral trade.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:635613 |
| Date | January 2014 |
| Creators | Chung, Wanyu |
| Publisher | University of Warwick |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://wrap.warwick.ac.uk/66297/ |
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