Bilateral trade and productivity: analysis for trading partners of China and the United States

This paper contributes to the trade–development nexus by investigating the link between trade integration and economic well-being in the developing eight (D-8) countries comprising Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, and Turkiye. Essentially, this paper examined how trade openness, financial openness, and the exchange rate contributed to gross national income (GNI) per capita (a proxy for economic well-being). The panel data obtained from the United Nations Conference on Trade and Development (UNCTAD), the World Bank’s World Development Indicator (WDI), and the Chinn-Ito index between 2005 and 2021 were analysed using the two-step generalized method of moments (GMM), panel unit root, and Rao cointegration, among others. Evidence of a long-run relationship among the variables was established from the Kao cointegration test results at the 5 per cent significance level. This suggests that trade integration has a forecasting ability for economic well-being in the D-8 countries. The results of the two-step GMM revealed that trade openness significantly enhanced the economic well-being of the D-8 countries. This finding explains that cross-border trade among the members of the D-8 countries plays a substantial role in improving the standard of living of the population. Similarly, the results showed that as the degree of financial openness grew, economic well-being improved significantly. However, the results further revealed that exchange rate depreciation had an insignificant negative effect on economic well-being. Given the findings, this paper recommends that policymakers in the D-8 countries should synergise to implement a non-restrictive trade policy, gradually collapse the barriers to financial openness, and promote exchange rate stability to create more opportunities for economic development.

This paper investigates the relationship between business cycle synchronization and trade integration in the Latin American region. Using data for 17 Latin American countries and the United States (US) from 1980 to 2018, we document the time-series characteristics of business cycle synchronization and intraand inter-regional trade in the region and empirically test whether trade integration contributed to business cycle synchronization. The data demonstrate that the business cycle synchronization index has been steadily increasing in the region. Regional trade integration increased until the financial crisis in 2008 and decreased slightly thereafter. The results of a system generalized method of moments (GMM) regression indicate that bilateral trade with the US significantly increased business cycle synchronization in the region, except during the 2000s, while regional trade had no significant effect. These results emphasize the importance of the indirect trade channel, especially with the US, as a main channel of business cycle synchronization in Latin America.

Comment

This research is based on a systematic review approach that differs from reflects the findings in that it is transparent, accessible, and enables a union between the scientific community and practitioners, resulting in an overall synthesis. According to the research findings based on the systematic analysis, the factors influencing Indonesia to engage in bilateral trade with the United States to improve the trade balance fall into two categories: those related to international trade and those unrelated to international trade. Globalization of bilateral commerce, open markets, disparities in natural and human resources, and disparities in natural resources are aspects of bilateral trade. Meanwhile, variables unrelated to bilateral trade include bilateral agreements, trade performance, trade potential, trade balance, and trade relations. As a legal basis for providing legal certainty in commercial cooperation relationships, the Republic of Indonesia and other nations must enter into bilateral agreements.

New Estimates of the United States–China BilateralTrade Balances

The current study aims to investigate the effect of devaluation on a bilateral trade balance between China and the United States. The study uses monthly data for the period 20‐11‐2018, which is seasonally adjusted through the Seasonal Trend Decomposition using Loess (STL) method. The dependent variable used in this study is exports to import ratio, and the independent variable is the exchange rate. The study uses both linear and nonlinear ARDL methodology to trace the long run and short run effect and to trace the asymmetry between exports to imports ratio and exchange rate. Moreover, the long‐run relationship is established through Bound testing approach. The findings favor the devaluation for China trade balance both in the short run and long run. Moreover, the results do not support the existence of J‐curve and indicate that rather than devaluation it is the competitiveness of Chinese goods and services that provide an edge in bilateral trade between China and United States.

This paper develops the fixed-smoothing asymptotics in a two-step generalized method of moments (GMM) framework. Under this type of asymptotics, the weighting matrix in the second-step GMM criterion function converges weakly to a random matrix and the two-step GMM estimator is asymptotically mixed normal. Nevertheless, the Wald statistic, the GMM criterion function statistic, and the Lagrange multiplier statistic remain asymptotically pivotal. It is shown that critical values from the fixed-smoothing asymptotic distribution are high order correct under the conventional increasing-smoothing asymptotics. When an orthonormal series covariance estimator is used, the critical values can be approximated very well by the quantiles of a noncentral F distribution. A simulation study shows that statistical tests based on the new fixed-smoothing approximation are much more accurate in size than existing tests.

This study provides empirical evidence concerning the impact of financial access on total factor productivity (TFP) and its components in a transitioning nation (i.e., Vietnam). The results reveal a U-shaped relationship between financial access and TFP. This implies that the rapid rise of financial access in an economy characterized by informal sectors, high cash usage, and substantial state bank control, as in Vietnam, may result in costs outweighing the benefits. Notably, the study affirms the positive moderating role of institutional quality on the nexus being examined, while the application of information and communication technology (ICT) might exacerbate pre-existing risks in the financial market when the population accesses financial services to excess. The study’s findings are reinforced by addressing endogeneity, cross-sectional dependence, and heteroscedasticity concerns through estimations utilizing the two-step generalized method of moments (GMM) system, a panel corrected standard error estimator (PCSE), and feasible generalized least squares (FGLS) estimators. Consequently, these research findings offer a more in-depth insight for policymakers and researchers regarding the impact of financial inclusion on the economy, particularly in transitioning nations.

PurposeThe study aims to examine the determinants that affect the firm’s performance in the service industries. Moreover, the study examines step-by-step how to choose the best model among the various panel data models.Design/methodology/approachAfter employing the secondary data of the service industry firms from the CRIBIS database from 2017 to 2021, I estimated the regression model by pooled ordinary least squares (OLS), fixed-effect, one-step difference generalized method of moments (GMM), two-step difference GMM, one-step system GMM and two-step system GMM.FindingsAfter employing the suggested criteria by Bond, Hoeffler, and Temple (2001), the findings of the current research exposed that the outcomes of the two-step system GMM should be preferred among dynamic panel data models. The significant results of the two-step system GMM revealed that leverage, tangibility, firm size and firm age negatively impact firm performance in the Czech service industries. Conversely, capital turnover ratio and physical capital intensity have a positive relationship with firm performance.Practical implicationsThis research will help academics, policymakers and managers improve firm performance. The present research findings will guide them in choosing the appropriate model among dynamic panel data models and examining the factors that affect the firm’s performance in the service industries.Originality/valueThis is the first study to suggest how to choose the best model among various panel data models and then examine how a variety of determinants affect the firm performance of the service industries. By including six service sectors simultaneously, the study comprehensively answers how and why to choose an appropriate model among dynamic panel models and then interprets each of the selected determinants of firm performance from economic and financial points of view. Therefore, this study contributes both theoretically and practically to the field.

The United States has recently experienced unprecedented balance of trade deficits. The merchandise trade deficit reached an all-time high of over $61 billion in 1983, and for 1984 was $108 billion. Japan is often singled out as the major contributor to this deficit. In 1984, roughly one-third of the U.S. merchandise trade deficit and over one-half of the U.S. manufacturing trade deficit was with Japan. Moreover, since shifts in trade balances are widely regarded as a function of changes in exchange rates, there has been a tendency to focus on the general depreciation of the yen in terms of the dollar which began in 1978 in explaining the U.S. trade deficit. This paper explores empirically the response of the U.S.-Japanese trade balance in manufacturing to movements in the yen-dollar rate. The analysis, based on both structural and reduced form approaches, provides a test of the conventional view that the weak yen has been a major factor explaining the Japanese penetration into the U.S. manufacturing sector, while Japanese protectionism has effectively insulated Japan's markets from U.S. competition. Our analysis does not support this view. We find U.S. imports from Japan essentially insensitive to exchange rate movements, but U.S. exports to Japan highly exchange rate elastic. Since U.S. manufacturing imports from Japan dominate corresponding exports ($58 billion to $8 billion in 1984), we conclude that even a sustained appreciation of the yen in terms of the dollar is unlikely to reduce significantly the U.S. manufacturing trade deficit. In section II of this paper we specify structural and reduced-form models explaining U.S. bilateral manufacturing trade with Japan. In section III we present and evaluate struc-

The study examines the effect of macroeconomic instability on financial market development among economies in the sub-region of sub-Saharan Africa (SSA) using a sample of 31 countries from 1996 to 2019. The study focuses on how composite macroeconomic risk index and uncertainty associated with key macroeconomic variables influence the pace of development of financial markets in the sub-region. Empirical estimates and analyses in this regard were performed using the two-step generalized method of moments (GMM) estimation technique. Results from the empirical estimates suggest that macroeconomic risk, inflation volatility and output growth volatility impede the development of financial markets among economies in the sub-region, holding all else constant. Further results show that improved governance and institutional quality may not be enough to assuage the negative impact of heightened macroeconomic risk and uncertainty on financial market development. Political instability, in contrast, is found to worsen the negative influence of macroeconomic risk and uncertainty on financial market development among economies in the SSA sub-region.

The important role played by the Chinese commercial banks in the development of China’s economy has made the government and banking regulatory authority concerned about the performance of these banks.Indeedthe stability of the banking sector has attracted greater attention since the financial crisis of 2007-2009. The principal objective of this study is to investigate the inter-relationships between profitability and stability in the Chinese banking industry. Using a sample of Chinese commercial banks over the period 2003-2013, the study examines the inter-relationships under an auto-regressive-distributed linear model. Both Z-score and stability inefficiency were used as measures of stability, while Return on Assets (ROA) was used as the indicator of profitability. Different types of Generalized Method of Moments (GMM) estimators including difference GMM, one-step system GMM, two-step system GMM as well as two-step robust GMM were used. In order to the check the robustness of the results, alternative econometric techniques were used, such as ordinary least square (OLS) estimator, between effect estimator, as well as fixed effect estimator. The results show that higher insolvency risk/lower bank stability leads to higher profitability of Chinese commercial banks and also that higher profitability leads to higher bank fragility. Keywords: bank profitability, bank risk, China. JEL classification: G21, C23

일방적 통상정책의 국제적 확산과 무역구조의 변화에 관한 연구 (A Study on Unilateral Trade Policy and International Trade Structure)

This paper considers generalized method of moments (GMM) estimation of the inclusive panel AR(1) model that contains the covariance stationary panel AR(1) model and the panel AR(1) model with a unit root as special cases. The paper presents a two-step optimal linear GMM (OLGMM) estimator for the inclusive model that is asymptotically equivalent to the optimal nonlinear GMM estimator of Ahn and Schmidt (1997, Journal of Econometrics 76, 309–321) when the data are covariance stationary. Next the paper derives the asymptotic distribution of the OLGMM estimator when the model has a unit root under a variety of assumptions about the initial observations and the initial estimator. It is shown that in most cases the OLGMM estimator is superconsistent. In addition it is shown that the iterated OLGMM estimator is superefficient when the variance of the initial observations is finite and fixed, i.e., small compared to the cross-sectional dimension of the panel. The paper also conducts a Monte Carlo study in which the finite-sample properties of various GMM estimators for the inclusive panel AR(1) model are compared.I thank Steve Bond and Frank Windmeijer for kindly making one of their computer programs available to me. I also thank two anonymous referees and a co-editor for very helpful comments. This research was funded by the ESRC under grant R000239139.

In an effort to reduce trade deficit, the United States has sought to introduce tariffs on imports, primarily of Chinese products. However, countries with which the United States runs large trade deficits are under pressure to negotiate about reducing the bilateral trade deficit with the United States. Among them is Japan. The US administration in bilateral trade talks with Japan toward a new bilateral trade agreement seeks to encourage US exports of agricultural products to Japan and reduce imports of Japanese cars in the US. If the trade agreement contains restrictions on the export of Japanese cars to the US market, it will damage Japanese manufacturers, but also customers in the United States, due to the higher costs of buying a car. However, it would not be the first time since Japan, under the pressure of the United States, introduced Voluntary Export Restraint (VER) in 1981 on car exports to the United States that were abolished in 1994. These restrictions have brought huge costs for both Japanese car manufacturers and consumers in the United States. The outcome of the US and Japan trade talks about a new trade agreement will show whether history repeats itself.