Globalisation: Recent Traits and Challenges

This special issue gathers together twelve papers that revisit a range of core topics in the field of international economics. These papers were presented at the XIX Conference on International Economics (CIE) held in Vila&#8208;Real (Spain) on 28th&#8211;29th June 2018. The Conference was co&#8208;organized by researchers from the Spanish Association of International Economics and Finance (AEEFI) and the Institute of International Economics (IEI). The selected papers are stimulating pieces that shed new light on recent trends in globalization as well as some of the main challenges that need to be faced in the presence of the multiple yield curves that emerged after the credit crunch. The CIE also included two keynote lectures by Laura Alfaro (Harvard Business School) and Gabriel Quir&#243;s (IMF) as well as 64 selected contributions.


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CUADROS AnD ORDÓÑEZ as manufacturing. Since this positive finding is mainly related to their 4-year lag indicator, increases in the effective labour reallocation due to multinational activity occur with a considerable time lag; this seems reasonable considering that some FDI projects, in particular greenfield projects, often take time to become operational.
The third paper by Federico Carril-Caccia and Elena Pavlova deals with how countries' insertion in international trade and global value chains (GVCs) affects their capacity to attract foreign M&As. One of its main contributions is the new measures of GVCs, relying on the World Input-Output Database (WIOD) from the OECD. The outcomes reveal that the position and participation in GVCs are relevant for explaining bilateral M&As. However, the role of these determinants differs significantly depending on the level of development of the home and host countries.
Terence Edwards, Ben Ferret and Daniel Gravin shed some light on the strategic factors that explain whether a firm will engage in R&D collaboration, either with a local or with a foreign competitor. The authors conclude that lower international trade costs reduce the incentive for cross-border collaboration due to the fact that more intense product-market competition makes firms less willing to share their R&D results with each other. The willingness to collaborate with a foreign firm increases with the size of the foreign market. The authors conclude that, in some cases, despite the fact that R&D cross-border collaboration is efficient, a local collaboration emerges in equilibrium. This finding indicates that a conflict between the firm's collaboration choices and efficiency is likely to arise unless governments subsidise R&D.
In the fifth paper, Roger Bandick investigates the effects of imported inputs on productivity growth and export intensity, using data on Danish manufacturing firms. The results show that firms that decide to offshore report better ex-ante performance than those that do not. However, offshoring firms still learn from this activity in terms of higher growth in productivity and export intensity. This learning process differs between firms: whereas firms that offshore to low-wage countries do not seem to register changes in productivity and export intensity, non-offshoring firms do. From a policy perspective, this finding does not seem to lend support to growing fears that offshoring is detrimental for the economy, since firms may potentially benefit in terms of higher productivity and export intensity due to global sourcing.
Juan Mañez, Consuelo Minguez, María Rochina, and Juan Sanchis analyse the effects of firms' decisions to export output and/or import intermediates on productivity and mark-ups. The authors contribute to the extant literature in a number of ways: first by analysing the dynamic linkages between firms' imports of intermediates and export decisions; second, by examining simultaneously the effects of importing intermediates and exporting on productivity; and, third, by assessing the impact of importing inputs and exporting on mark-ups. Regarding the latter, the authors investigate whether those effects on mark-ups operate through the price and/or the marginal costs channels. By using the Spanish Survey on Business Strategies for the period 2006-14, the authors conclude that the analysed effects depend on the size of the firm. Thus, for small and medium-sized enterprises (SMEs), importing intermediates and exporting activities both have a positive effect on productivity and mark-ups. However, for large firms, only exports affect the mark-up, while productivity is solely influenced by the importing activity. In both cases, the internationalisation decisions affect the mark-up through both the price and the marginal cost channel.
The seventh paper by Salvador Gil-Pareja, Rafael Llorca-Vivero and Jordi Paniagua examines how the improvement in institutional contractual quality promotes trade. This paper highlights the fact that ratifying international conventions aimed at facilitating the resolution of commercial disputes (e.g., through arbitration and conciliation) is an effective way to enhance institutional quality and thus promote trade flows. This work provides an interesting and novel approach focused on the potentially heterogeneous effects on bilateral trade of adherence to international trade law conventions,

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CUADROS AnD ORDÓÑEZ such as The New York Convention. The authors develop a model, which tries to explain under which circumstances parties will choose arbitration versus litigation and explore the potential effects of that decision on trade flows. The results obtained indicate that arbitration has a moderate and positive effect on exports, which increases (decreases) with the contractual quality of the exporter (importer) and the remoteness of markets. The effects of conciliation are similarly positive, but only for similar trading partners with high levels of income. Results also suggest both domestic trade law reform and international treaties have a positive effect on trade, with the latter having a stronger effect.
Gabriela Ortiz and Maria C. Latorre explore the quantitative impact of Brexit by means of a computable general equilibrium (CGE) model. Unlike most previous studies, this paper focuses on two dimensions through which the UK's exit from the EU could result in economic impacts: trade and migration. The estimates indicate a more sizeable negative impact on the UK than reported by other previous influential studies. Given the historical relevance as well as the evolving scenario around the Brexit deal, this paper provides a timely update and provides alternative evidence that can inform the ongoing debate about the impact of Brexit.
The ninth paper by Juan Ángel Lafuente, Nuria Petit, Jesús Ruiz and Pedro Serrano focuses on the idea that a single yield curve is no longer sufficient to describe the market of interest rate products after 2008. They propose an empirical decomposition of the Euribor basis swap spreads into expected and unexpected components, covering the period from December 2007 to November 2014. Expected shocks account for the continuous arrival of information to the market while unexpected innovations represent uncommon information reaching the market. They find that interbank credit risk is the predominant and most common source of fluctuations affecting the curves. However, for the short tenors, credit and liquidity risks are unexpected drivers. Finally, they show that systemic risk also plays a significant role in explaining the nature of uncertainty in the interbank credit market, suggesting that a European breakdown is being priced in the market.
The paper by Ferdinand Dreher, Johannes Gräb and Thomas Kostka exploits the information content in the zero-coupon yield curve estimated from bonds with maturities from three months to ten years. In particular, they provide empirical evidence on how to improve traditional carry trade strategies for the G10 currencies vis-à-vis the US dollar. Considering the Nelson-Siegel three-factor model, they find that the curvature component emerges as an anticipated signal for future currency movements 1-6 months ahead. Compared with traditional carry trade strategies, currency portfolios based on the yield curves exhibit lower negative return skewness. These last two papers open the door to additional research aimed at exploiting the joint potential forecasting ability from several forward curves.
Rebeca Jiménez-Rodríguez and Amalia Morales-Zumaquero study the exchange rate pass-through (ERPT) into domestic consumer prices in BRICS (Brazil, Russia, India, China and South Africa) countries and examine the macroeconomic determinants of the degree of ERPT. This paper differs from previous works on BRICS in regard to several issues: (a) all five BRICS countries are analysed, unlike in other studies that focus on a particular country; (b) the second-stage ERPT (ERPT into domestic prices) is studied; and (c) different econometric approaches are considered (namely, single equation model, vector autoregression model, and time-varying parameter model); and (d) the macroeconomic determinants of the degree of ERPT are assessed for these countries. The findings suggest that ERPT is higher for the emerging markets with mostly floating exchange rates (Brazil, Russia and South Africa) than for the other BRICS countries, with exchange rate explaining a high percentage of the price variability in the former and a low percentage in the latter. Moreover, the key macroeconomic determinants for BRICS economies seem to be inflation volatility, exchange rate volatility and openness.

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In the last paper, José Zabala and María Prats assess the effectiveness of the unconventional monetary policy implemented by the ECB with regard to inflation and economic growth. During the financial crisis, the ECB redirected its traditional monetary policy based on interest rates, to an unconventional monetary policy focused on the quantitative expansion of its balance sheet. Based on a SVAR model including the EONIA rate, the total assets on the ECB's balance sheet, and the Eurozone inflation rate and economic growth, the results for the period 2007Q1-2018Q4 support the existence of monetary transmission as well as the effectiveness of the monetary policy adopted by the ECB to achieve economic stability.
We are grateful to all those who contributed papers to this special Issue. Special recognition is given to the Vila-Real council for financial support, which helped fund the VII Meeting on International Economics and in turn made this special issue possible. We would also like to thank all the members of both the Scientific and the Organizing Committees for their help: Cristina Aliaga, Jordi Ripollés, Juliette Milgram, Juan Ángel Lafuente, Barbara Dluhosch, Laura Marquez, Antonio Navas, Simona Mateut, Carmen Díaz-Roldán and Maria Santana. We are also indebted to Chris Milner and David Greenaway for accepting our proposal for a special issue in the World Economy journal. Many thanks also to Sue Berry (The World Economy journal manager) for her assistance.