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In order to avoid the destructive 'beggar-thy-neighbour' strategies that emerged during the Great Depression, the post-war Bretton Woods regime attempted to prevent countries from depreciating their currencies to gain an unfair and sustained competitive advantage. It required fixed, but occasionally adjustable, exchange rates and restricted cross-border capital flows.
This paper documents stylized facts about the evolution of trade and foreign direct investment (FDI) between India and the United States over the last four decades. We ask the question: does India-US trade and FDI deviate from its potential i.e. the level that would have been predicted by standard determinants? Using an augmented gravity model and a large sample of countries over 1970-2009, we find that while India's exports to the US are 34% higher than predicted, US exports to India are in line with its potential. Notably, we find strong reversals in the nature of these trading relationships over time. India loses its over-trading status while US turns out to be under-exporting to India in the period after 1990. We also find significant variation in trade performance across product categories. For primary and intermediate goods during post-1990, US exports to India turn significantly below normal. Conducting similar analysis for bilateral FDI flows for the period 1985-2009, we show that while US direct investments in India are in line with predictions based on fundamentals, India has actually been an under-investor in the US market.
We analyze the dramatic decline in India's inflation over the last two years using an augmented Phillips Curve approach and quantify the role of different factors. Our results suggest that, contrary to popular perception, the direct role of lower oil prices in India's disinflation was relatively modest given the limited pass-through into domestic prices. Instead, we find that inflation is a highly persistent process in India, reflecting very adaptive expectations and the backward looking nature of wage and support price-setting. As a consequence, we find that a moderation of expectations, both backward and forward, and a rationalization of Minimum Support Prices (MSPs), explain the bulk of the disinflation over the last two years.
This paper estimates the effect of China's exchange rate changes on exports of developing countries in third markets. We develop an identification strategy in which the degree of competition between China and its developing country competitors in specific products and destinations plays a key role. We exploit variation across exporters, importers, products and time-afforded both by disaggregated trade data and bilateral exchange rates-to estimate this "competitor country effect." We find robust evidence of a statistically and quantitatively significant effect. Our estimates suggest that a 10 percent appreciation of China's real exchange rate boosts a developing country's exports of a 4-digit HS product to third markets on average by about 1.5-2.5 percent.
In this article we carry out a descriptive analysis of lobbying expenditures on migration in the USA between 1998 and 2005. While political action committees (PAC) contributions and lobbying are in general positively correlated, our results suggest that this is not the case when it comes to lobbying on migration. As a result, any analysis of the role of lobbying in migration should not focus on PAC contributions alone. Comparing lobbying on migration and trade, we find that substantially more resources are spent on the latter than on the former. Finally, lobbying on migration appears to be more concentrated than lobbying on trade both across sectors and across organizations.
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