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Rosenberg Institute Global Briefs and Thought Leadership

Pulp Mill Fiction: a Conflict to Solve the “Distance Puzzle”
Carolina Pan

Geographic distance certainly matters for international trade. According to Berthelon and Freund (2004), over half of the world trade is between countries that are less than 3000km apart. It is very well documented in the literature of empirical international trade that distance has a negative impact on bilateral trade. This is known as the “distance-elasticity puzzle”: the distance elasticities that we estimate are too large to represent just transport costs. So the question remains: What is the true impact of geographic distance on bilateral trade?


From Ideas to Trade: how technology affects exports

Carolina Pan

This paper studies the role of technology in international trade. Using patent data to capture technological know-how, we show that countries differ technologically in two dimensions: the stock of technology, and its allocation across the economy. The literature has taken into account the role of the former, but neglected the latter. We build on the seminal work of Eaton and Kortum (2002) and develop a Ricardian model that incorporates the allocation of technology as a determinant of bilateral trade. Our model predicts that, as in the previous literature, the exporter's stock of technology has a positive impact on exports while the relative input costs have a negative one. In addition, our model predicts that the covariance between the allocation of technology and relative input costs affects trade. In particular, a more even distribution of technology benefits countries with lower input costs, and viceversa. The empirical results confirm the model's predictions and indicate that technological innovation matters for trade through both the stock of patents and their allocation across the economy.

View Pan's Global Finance Brief


Do Loan-to-Value Ratio Regulation Changes Affect Canada Mortgage Credit?
Jeremy Kronick

One of the most important factors that contributed to the Great Recession was the collapse of the housing market. In response to this collapse, policymakers around the world began looking for targeted ways of preventing the overheating of their domestic housing markets. One of these tools, the loan-to-value ("LTV") ratios, which fits into the broader macrorpudential regulation toolbox, has come to the forefront. Then question then becomes how effective do we anticipate LTV ratio regulation changes to be in slowing down the rate of mortgage credit growth. To investigate this question,the brief will analyze the Canadian housing market, as both the government and Bank of Canada continue to look for ways of creating a soft landing.

View Kronick's Global Research Brief 

Monetary Policy Shocks From the EU and US: Implications for Sub-Saharan Africa
Jeremy Kronick

Following the financial crisis, interest rates in both the Euro Area (“EU”) and United States (“US”) were lowered to historical lows implying that at some point in the future, increases are likely.  Sub-Saharan African (“SSA”) economies have a high degree of exposure to the EU and US both in terms of trade and debt, making them susceptible to foreign monetary policy shocks. Given these facts, the question becomes, what would be the consequences of a contractionary foreign monetary policy shock from either the EU or US on the real economies of these SSA countries?


To Predict the Equity Market, Consult Economic Theory
Davide Pettunuzzo

Despite more than half a century of research on forecasting stock market returns, most predictive models perform quite poorly when they are put to the test of actually predicting equity returns. In fact, many authors, including Bossaerts and Hillion (1999), Brennan and Xia (2005), and Welch and Goyal (2008) suggest that equity returns cannot be predicted at all. This brief proposes a simple yet very effective solution to improve the quality of stock return predictions by taking economic theory into account.

Old Italian Violins: A New Investment Strategy?
Kathryn Graddy and Philip Margolis, 2013

Old Italian violins appear to have been a good investment. Figure 1 plots an index on a log scale adjusted for inflation since 1875. From about 1890 to 1960 violin prices were stagnant. Between about 1960 and 1980 there was a sharp rise in prices. Prices have risen, with some ups and downs, since 1980.

View Graddy's Global Finance Brief


How do dollar exchange rate movements get passed through to US import prices?
Raphael S. Schoenle, 2012

This policy brief addresses these questions and provides three insights that contribute to a better understanding of the effect of exchange rate movements on US import prices. First, it shows that the overall response of import prices to exchange rate movements is muted and less that one-to-one. Second, import prices respond relatively little to exchange rate movements that are specific to a country, such a China, while they are more sensitive to broad US dollar movements. Third, market structure plays an important role in determining the exact impact of exchange rate movements: Countries with a large importer share in one product relative to other importers can use their market power to adjust their import prices more.

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Are lost decades in the stock market black swans?
Blake LeBaron, 2012

The day to day fluctuations in global stock markets are well known to investors. The chance of losing money on any given day in the market is only slightly less than even odds. However, as the time horizon expands, equity returns begin to reveal lower risk, and many investors have felt very safe betting on long-run returns. But what is the real risk exposure of these long-run investors?

View LeBaron's Global Finance Brief


"The Impact of New Financial Regulations on Emerging Markets:
A Synthesis of a Global Survey"

Vladislav Prokopov, 2011

Master's candidate in international economics and finance leads project on financial regulations, studying whether a Basel III agreement can construct and maintain a sound financial and regulatory framework.

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"Start-up Firms in the Financial Crisis"
Catherine L. Mann, 2011

A professor of global finance finds that different kinds of start-ups are funded differently at inception.

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World Bank: "The Credit Crisis of Emerging Market Firms"
Esteban Ferro, PhD '11

PhD student proposes the question: "Is access to credit an obstacle for firms in emerging markets?" and presents data demonstrating how lack of access to credit can negatively impact a firm's bottom line. Further explains how firms with limited access to financial services are condemned to a slower growth path and diminished rate of return on profits per loan.

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How will we pay down the Bush-Obama debt?
George Hall, 2010

By the end of 2009, privately-held U.S. Treasury debt stood at 53.0% of the gross domestic product (GDP), double the share from when President George W. Bush took office nine years ago. As illustrated in Figure 1, this ratio is below its peak of 66.2% in 1945. The Congressional Budget Office estimates that it will continue on its upward trajectory and return to World War II percentages by the end of 2012 as a consequence of extraordinarily large primary fiscal deficits and weak GDP growth.

View Hall's Global Finance Brief