{"title":"Seniority and sovereign default: The role of official multilateral lenders","authors":"Adrien Wicht","doi":"10.1016/j.jinteco.2025.104098","DOIUrl":"10.1016/j.jinteco.2025.104098","url":null,"abstract":"<div><div>This paper studies official multilateral lending in the sovereign debt market. Official multilateral debt receives priority in repayment, even though this is not legally required. It represents an important portion of total sovereign debt and increases both before and during a default. Defaults on official multilateral debt are infrequent, last relatively longer and are associated with greater private lenders losses. I develop a model with private and official multilateral lenders where the latter benefits from a greater enforcement power in repayment. This allows the model to rationalize the aforementioned empirical facts and generates non-monotonicity in the private bond price. In small amount, official multilateral debt has a positive catalytic effect which is quantitatively strong but short lived. Sovereign borrowers value the use of official multilateral debt and would not necessarily prefer other seniority regimes.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104098"},"PeriodicalIF":3.8,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143895639","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Lobbying, trade, and misallocation","authors":"Jaedo Choi","doi":"10.1016/j.jinteco.2025.104086","DOIUrl":"10.1016/j.jinteco.2025.104086","url":null,"abstract":"<div><div>This paper studies how lobbying affects welfare gains from trade in a second-best world. I develop an open economy model of heterogeneous firms that can lobby to influence firm-specific distortions. As trade costs decline, exporters increase lobbying due to the complementarity between market size and lobbying benefits, impacting allocative efficiency, firm entry, and consequently gains from trade. I estimate the model using an IV strategy and indirect inference with US firm-level data. Gains from trade are 4% higher with lobbying, driven by larger improvements in allocative efficiency as more productive exporters increase lobbying, mitigating their initially unfavorable exogenous distortions. However, when selection is driven by exogenous distortions, trade may cause welfare losses exacerbated by lobbying. These findings suggest that firms’ micro-level adjustments matter for gains from trade.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104086"},"PeriodicalIF":3.8,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143885942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Default and development","authors":"Lei Li , Gabriel Mihalache","doi":"10.1016/j.jinteco.2025.104089","DOIUrl":"10.1016/j.jinteco.2025.104089","url":null,"abstract":"<div><div>We develop a quantitative theory of the long-run frequency of sovereign default, in which the government’s willingness to risk crises reflects the sectoral composition of the economy. Development and structural transformation alter the trade-offs faced by the government, with the implication that default is largely a lower income country phenomenon, as in the data. Default impacts adversely the balance sheets of financial intermediaries, who then offer unfavorable rates on working capital loans to producers. The resulting contraction in activity is asymmetric across sectors, based on their financing requirements, and tax revenues fall. Governments find it unappealing to risk default if the economy is more vulnerable to financial distress, due to a larger share of value added from manufacturing and services, even for the same Debt to GDP ratio. This mechanism supports the notion of countries eventually “graduating” from sovereign default crises.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104089"},"PeriodicalIF":3.8,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143904147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Should governments promote or restrain urbanization?","authors":"Wenbin Wu , Wei You","doi":"10.1016/j.jinteco.2025.104084","DOIUrl":"10.1016/j.jinteco.2025.104084","url":null,"abstract":"<div><div>In a system of cities model that incorporates urban externalities, equilibrium city sizes deviate from optimal city sizes, which suggests a role for government intervention. Using a general equilibrium framework that incorporates agglomeration benefits and costs and that is calibrated to data from China between 2000 and 2020, we show that it is generally welfare-reducing to control city sizes through internal migration restrictions since the frictions they introduce outweigh the benefits of correcting for city size deviations. However, we also find that most large Chinese cities have already surpassed the optimal sizes from their local perspective, so without controlling city sizes, the average welfare of city residents would decrease. This suggests that a combination of policies is needed to both improve aggregate welfare and alleviate the distributional consequences for a rapidly urbanizing country.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104084"},"PeriodicalIF":3.8,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144089644","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Maria Bas , Lionel Fontagné , Irene Iodice , Gianluca Orefice
{"title":"Heterogeneous trade elasticity and managerial skills","authors":"Maria Bas , Lionel Fontagné , Irene Iodice , Gianluca Orefice","doi":"10.1016/j.jinteco.2025.104093","DOIUrl":"10.1016/j.jinteco.2025.104093","url":null,"abstract":"<div><div>This paper investigates the role of firms’ managerial skills in the heterogeneous reaction of exporters to common exogenous changes in their international competitiveness (here captured by changes in the real exchange rate). Relying on a simple theoretical framework, we show that firms with better managerial skills have higher profits, market power and are able to adapt their markup more when faced with a competitiveness shock. We test this prediction relying on detailed firm-product-destination level export data from France for the period 1995-2007 matched with specific information on the firms’ share of managers. Our findings show that managerial intensive firms have larger exporter <em>price</em> elasticity to real exchange rate variations. In the wake of a depreciation, exporters whose management intensity is one standard deviation higher than the average, increase their prices by 51% to 73% more than the average exporter. This finding is robust to alternative explanations suggested by the literature.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104093"},"PeriodicalIF":3.8,"publicationDate":"2025-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143881500","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Anna L. Sobiech , Lechedzani Kgari , Linh Nguyen , John O.S. Wilson
{"title":"Implicit guarantees and bank stability: Evidence from a quasi-natural experiment","authors":"Anna L. Sobiech , Lechedzani Kgari , Linh Nguyen , John O.S. Wilson","doi":"10.1016/j.jinteco.2025.104094","DOIUrl":"10.1016/j.jinteco.2025.104094","url":null,"abstract":"<div><div>Do parent bank implicit guarantees enhance or diminish the stability of foreign subsidiaries? Using a quasi-natural experiment in the form of a regulatory intervention which removed parent banks' option to provide financial support to affiliated foreign subsidiaries, we find a substantial increase in the overall default risk of foreign subsidiaries. Less stringent private and supervisory oversight in host countries exacerbates the adverse impacts on risk. Overall, the results align with the notion that a loss in implicit guarantees implies a decline in reputational capital and franchise value. Beyond financial stability, the intervention likely has economic implications. Foreign subsidiaries increase lending and deposit funding, particularly those with stronger initial capitalization. These patterns are consistent with risk-compensating behavior where subsidiaries, following the loss of parental guarantees, expand balance sheets to sustain funding and market presence. Our findings inform ongoing policy debates regarding the merits of implicit guarantees for bank stability.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104094"},"PeriodicalIF":3.8,"publicationDate":"2025-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143881499","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Monetary policy and exchange rate dynamics in a behavioral open economy model","authors":"Marcin Kolasa , Sahil Ravgotra , Pawel Zabczyk","doi":"10.1016/j.jinteco.2025.104087","DOIUrl":"10.1016/j.jinteco.2025.104087","url":null,"abstract":"<div><div>We analyze the implications of adding boundedly rational agents á la Gabaix (2020) to the canonical New Keynesian open economy model. We show that accounting for myopia mitigates several “puzzling” aspects of the relationship between exchange rates and interest rates and helps explain why some of them only arise in the nested case of rational expectations. Bayesian estimation of the model demonstrates that a high degree of “cognitive discounting” significantly improves empirical fit. We also show that this form of bounded rationality makes positive international monetary spillovers more likely and exacerbates the unit root problem in small open economy models with incomplete markets.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104087"},"PeriodicalIF":3.8,"publicationDate":"2025-04-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143850353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"How infrastructure shapes comparative advantage","authors":"Luis Baldomero-Quintana","doi":"10.1016/j.jinteco.2025.104083","DOIUrl":"10.1016/j.jinteco.2025.104083","url":null,"abstract":"<div><div>I show that domestic trade costs shape national comparative advantage by studying planned highway upgrades in Colombia. I build a multisectoral economic geography model with multiple shipping routes, industry linkages, external economies of scale, and trade costs that depend on both highways’ speed and ports’ usage. I discipline the model with data on customs transactions, domestic trade, and road travel times. My quantitative results show that the <em>Ruta del Sol</em> national highway would shift Colombia’s comparative advantage toward manufacturing. These upgrades would reduce intermediate input prices, lowering unit production costs, thus inducing an export boom. Manufacturing exports rise the most due to three channels. First, the road connects the largest manufacturing region with ports specialized in this sector. Second, manufacturing uses intensively tradable intermediate inputs, and the roadworks would increase their trade. Last, external economies of scale favor manufacturing because agglomeration forces are stronger for this sector relative to others.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104083"},"PeriodicalIF":3.8,"publicationDate":"2025-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143859683","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Felipe Brugués , Ayumu Ken Kikkawa , Yuan Mei , Pablo Robles
{"title":"The impact of NAFTA on prices and competition: Evidence from Mexican manufacturing plants","authors":"Felipe Brugués , Ayumu Ken Kikkawa , Yuan Mei , Pablo Robles","doi":"10.1016/j.jinteco.2025.104085","DOIUrl":"10.1016/j.jinteco.2025.104085","url":null,"abstract":"<div><div>This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ output prices and markups. We distinguish between Mexican goods that are exported and those sold domestically, and decompose their prices separately into markups and marginal costs. We then analyze how these components were affected by the reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs on Mexican exports. We find that domestically sold products saw a decline in prices as Mexican plants faced more competition and gained access to cheaper inputs. Prices of exported goods fell only slightly as plants increased their markups in response to a favorable competitive environment due to declines in U.S. tariffs.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104085"},"PeriodicalIF":3.8,"publicationDate":"2025-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143777599","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Pains or gains: Trade war, trade deficit, and tariff evasion","authors":"Yi Che , Donglin Lin , Yan Zhang","doi":"10.1016/j.jinteco.2025.104090","DOIUrl":"10.1016/j.jinteco.2025.104090","url":null,"abstract":"<div><div>This paper reveals that the reduction in the US-China trade deficit during the trade war obscured reporting discrepancies in US imports of Chinese products due to tariff evasion. We empirically examine the effect of the US-China trade war on tariff evasion in US imports of Chinese goods and provide direct evidence that market demand of entry states contributes significantly to tariff evasion. Using the input-output table, we find that a one standard deviation increase in local demand causes a 1.312-fold rise in tariff evasion for affected products post–trade war. This effect mainly works through intermediate goods, and its impact grows as importers' tariff liabilities increase. Further analysis considering local social environments shows that voters' attitudes toward trade protection and the development of labor unions play crucial roles in mediating the influence of market demand on tariff evasion.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"155 ","pages":"Article 104090"},"PeriodicalIF":3.8,"publicationDate":"2025-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143807887","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}