Content area
Abstract
The first chapter investigates whether there is a link between financing costs and international trade patterns. The potential importance of these considerations stems from the fact that approximately half of world trade is conducted on credit. We find that, first, with respect to price, the industry-level evidence indicates that financing costs determine international trade patterns, whereby for each industry the pass-through rates of exchange-rate changes into import prices are positively correlated with the industry's dependence on external-finance and trade-credit use. Second, with respect to volume, the country-level evidence suggests that between trading partners, the volume of trade-financing loans depends positively on the stronger trade and financial ties, including the higher value of total imports, the higher degree of product differentiation in imports, and the higher value of banking claims.
The second chapter provides industry-level evidence on the effects of uncertainty on the production of multinational firms in the presence of vertical specialization. The potential importance of this consideration stems from global production outsourcing from industrial countries to developing nations. We measure an industry's dependence on vertical specialization by the ratio of affiliate exports to local sales. Demand-side, supply-side, and sovereign-risk uncertainty were calculated for each host country. Our findings suggest that multinational-production activities of an industry that depends more on vertical specialization respond more positively to lower uncertainty in the host-country markets.
The third chapter studies IMF programs. Using duration analysis on the IMF agreements, we find that higher inflation, higher current-accounts deficits to GDP, instability of bureaucratic governance, and country's access to Poverty Reduction and Growth Facilities (PRGF) prolong the duration of participation in IMF programs.