Search Results (6)

This study investigates the relationship between the real effective exchange rate (REER) and its volatility with the net inflow of foreign direct investment (FDI) to Canada, placing a novel emphasis on sector-level analysis. The study utilizes time series data from 2007 to 2022 and employs the autoregressive distributed lag (ARDL) approach to assess short-run and long-run relationships between the said variables. The findings reveal significant impacts of changes in REER, its volatility, and GDP on net FDI in the short run, with lasting effects of REER and its volatility, lagged GDP, and trade openness on FDI in the long run. At the sectoral level, FDI inflows in energy and mining, manufacturing, finance, and insurance exhibit significant sensitivity to changes in REER. Simultaneously, the volatility of REER has a significant impact on FDI inflows in manufacturing industries and the finance and insurance sector in the short run. In the long run, REER exerts a significant influence on the net FDI inflows in energy and mining, as well as manufacturing industries. The asymmetry in findings suggests a need for sector-specific attention to retaining and attracting FDI to Canada. Full article

The 2030 Agenda for Sustainable Development recognizes international trade as an engine for inclusive economic growth and poverty reduction, and an important means to achieve the sustainable development goals (SDGs). Given this role, international trade and global trade networks have received preeminent attention in recent times due to the sharp growth in trade volumes and their contributions to poverty reduction and sustainable development over the years. Despite the growth in global trade volumes and the associated benefits, there are worrying concerns about the unprecedented changes in international trade patterns and growing imbalances in trade in recent times. Whereas China’s trade volumes have more than tripled over recent decades and have maintained the largest trade surplus spot ahead of Germany, other major trade surplus countries such as Japan, the USA, etc., have become trade deficit countries with their trade volumes increasing at a much slower pace. In view of the growing changes in international trade patterns and the need to understand the dynamics of the widening global trade imbalances among major trading partners, this paper investigates the factors that determine the export performance of countries. More specifically, the purpose of this paper is to highlight the forces that determine the export performance of countries using an augmented gravity model that includes social networks. The paper provides useful insights into the underlying currents responsible for the changes in international trade patterns. Using data from 51 countries for 41 years, our results indicate that the GDP of both the home country and the partner country affects the home country’s exports positively. Similarly, the real effective exchange rate REER, trade openness OPEN, and dummy variables BORDER, ENGLISH, and EU have produced positive and statistically significant coefficient estimates, and these are in line with our theoretical expectations. Full article

To achieve sustainable economic growth, Saudi Vision 2030’s target is to improve Saudi Arabia’s ranking on the Global Competitiveness Index from 25 in 2015–2016 to within the top 10 by 2030. Saudi Arabia also aims to increase the share of non-oil exports in the non-oil GDP from 16% in 2016 to 50% by 2030. For policymakers to make informed decisions to achieve these goals, they need to understand the driving forces of Saudi Arabia’s competitiveness. To this end, we consider the real effective exchange rate (REER) as a measure of external price competitiveness, as it captures domestic and global price changes. We then examine the REER using a two-stage modeling framework. First, we estimate the REER equation, which allows us to assess the impacts of the determinants and evaluate currency misalignments as a competitiveness indicator. Second, we extend the KAPSARC Global Energy Macroeconometric Model (KGEMM) with the estimated equation, which provides a framework for simulating the competitiveness impacts of the theoretically formulated determinants and other variables relevant to policymakers. The framework also allows us to account for feedback loops. We conduct a policy scenario analysis to quantify the competitiveness effects of the Public Investment Fund’s (PIF) new strategy for 2021–2025. We derive the following policy insights. Authorities may wish to implement initiatives boosting future productivity and, thus, competitiveness, such as PIF investments. Policymakers should be regularly informed about currency misalignment. Government consumption and public investment projects should consider substituting imports with locally produced goods and services. Local content development would also help to diversify the Saudi economy. Finally, attracting more foreign investment and other assets from the rest of the world may lead to technological development and improvement in the economic, financial, and social infrastructure and business environment, all enhancing competitiveness. Full article

This study analyzes the impact of mobility, as a proxy for social distancing measures, on exports to the United States of America (USA). A mobility index based on Google mobility indicators was constructed using Principal Component Analysis (PCA), and an Accelerated Failure Time (AFT) model was fitted to the data on export survival from a group of Latin American countries (LATAM). Higher mobility levels are associated with an acceleration of the risk of interruption of exports. On average, LATAM shows higher export survival levels compared to other countries. Higher innovation and market concentration favored export survival, while higher levels of Real Effective Exchange Rate (REER) are associated with a lower probability of survival. Differences in survival were found between export sectors with regard to machinery and transportation equipment. Full article

This paper examines the impact of special tariffs between China and the United States (US) on their indirect trade partners via spillover effects. We applied a Value-Added Real Effective Exchange Rate (VA-REER) index to simulate how an increase in tariffs induces changes in demand for goods from Indonesia and selected Asian partners. We used the Input–Output Database (WIOD) to simulate the spillover effects across partners via the Global Value Chain (GVC) using data from 2000 to 2014. The results suggest that demand is doubly more responsive to prices (tariffs) when value-added (VA-REER) index is used instead of the conventional REER index (gross trade). We found that US tariffs on Chinese goods have a negative spillover impact on Indonesia’s exports. Meanwhile, the Chinese tariffs on American goods lead to small increased demand for Indonesian exports. We also found that US and China become equally crucial for Indonesia under the Value-Added REER scheme, concluding that the conventional REER approach may have underestimated the impact of US tariffs on Chinese goods. Finally, we found that Indonesia would be at risk to trade shocks if the US applies tariffs on China, Asian partners (Japan and South Korea), and the European Union (EU). Full article

The diversification of the economy including its exports is at the core of Saudi Vision 2030. The vision targets to raise non-oil export from 16% to 50% of non-oil GDP by 2030. Achieving this, in addition to other goals, necessitates a better understanding of the non-oil export relationship with its determinants. However, we are not aware of a study that estimates the impacts of the determinants on Saudi non-oil exports covering the recent years of reforms and low oil prices and that conducts simulations for future. The purpose of this study is to develop an econometric modeling framework for Saudi non-oil export that can enhance informing the policymaking process through empirical estimations and simulations. For estimations, we applied cointegration and equilibrium correction methodology to the annual data for the period 1983–2018. Results show that Middle Eastern and North African countries’ GDP, as a measure of foreign income, and Saudi Arabia’s non-oil GDP, as a measure of production capacity, have statistically significant positive effects on Saudi non-oil exports in the long run. The real effective exchange rate (REER), as a measure of competitiveness, also exerts a positive effect in the long run if it depreciates and vice versa. Furthermore, our findings support the Export-led growth concept, which articulates that export can be an engine of economic growth and does not support the Dutch disease concept, which highlights the consequences of the resource sector for the non-resource tradable sector for Saudi Arabia. Macroeconometric model-based simulations conducted up to 2030 reveal out that the Saudi non-oil export is more responsive to the changes in REER than any other determinants. The simulation results also show that non-oil manufacturing makes a three times larger contribution to the future expansion of non-oil exports than agriculture. Moreover, the simulations discover that finance, insurance, and other business services, as well as transport and communication play an important role in improving the Saudi non-oil export performance in the coming decade. The key policy recommendation is that measures should be implemented in a coordinated and balanced way to achieve non-oil exports and other targets of the Vision. Full article