The Unassuming Economist

Source: IMF Working Paper (2022)

In this paper, the authors have developed a new measure of aggregate trade restrictions (MATR) using data from the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. It covers an unbalanced panel of 157 countries annually between 1949 and 2019, and is correlated with existing measures of openness and trade policy.

“MATR aggregates the multitude of ways that countries restrict the international trade of goods and services. The underlying variables cover tariffs, non-tariff barriers, and restrictions on requiring, obtaining, and using foreign exchange for current transactions. More precisely, MATR is based on the IMF’s AREAER binary variables related to: (i) exchange measures; (ii) arrangements for payments and receipts; (iii) imports and imports payments; (iv) exports and exports proceeds; and (v) payment and proceeds from invisible transfers and current transfers.”

In the second half of the paper, they establish its efficiency as a measure by using it to investigate the aftermath of trade restrictions across parameters like region, time, income groups etc.

Excerpts from Professor Dani Rodrik’s working paper, A Primer on Trade and Inequality (2021), for the National Bureau of Economic Research:

“In the public imagination globalization’s adverse effects have loomed large, contributing significantly to the backlash against the political mainstream and the rise of far-right populism. The literature on trade and inequality is in fact exceptionally rich, with important theoretical insights as well as extensive empirical findings that sheds light on this recent experience. Some of the key results of this literature, discussed here, are as follows: Redistribution is the flip side of the gains from trade, and it becomes larger relative to net gains from trade in the advanced stages of globalization. Compensation is difficult for both economic and political reasons. International trade often differs from other market exchanges, raising fairness concerns in ways that domestic markets do not. The economic benefits of deep integration are generally ambiguous. Dynamic or growth gains from trade are uncertain.”

Moreover, on the role of financial globalization and capital mobility the paper takes the following stand. “Researchers at the IMF have found that greater capital mobility produces strong inequality effects (Jaumotte et al., 2013; Furceri and Loungani, 2015; Furceri et al., 2017). In particular, they find that capital-account liberalization leads to statistically significant and long-lasting declines in the labor share of income and corresponding increases in the Gini coefficient of income inequality and in the shares of top 1, 5, and 10 percent of income.”

Click here to read the full paper.