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Local weather shocks have been shown to affect local economic output, however, little is known about their propagation through production networks. Using a six-sector global dataset over the past fifty years, this paper examines the effect of weather fluctuations and extreme weather events on sectoral economic production and the transmission of weather shocks across sectors, countries and over time. I document that agriculture is the most harmed sector by heat shocks, droughts and cyclones. Using input-output interlinkages, I find that sectors at later stages of the supply chain suffer from substantial and persistent losses over time due to domestic and foreign heat shocks in other sectors. A counterfactual analysis of the average annual output loss accounting for heat shocks across trade partners shows a substantial underestimation of the economic cost of temperature increases since 2000.

Macroeconomics --- Economics: General --- Macroeconomics: Production --- Business Fluctuations --- Cycles --- Transactional Relationships --- Contracts and Reputation --- Networks --- Macroeconomic Analyses of Economic Development --- Climate --- Natural Disasters and Their Management --- Global Warming --- Economic & financial crises & disasters --- Economics of specific sectors --- Currency crises --- Informal sector --- Economics

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We examine the impact of formal adoption of inflation targeting (IT) on inflation, growth and anchoring of inflation expectations in advanced economies and emerging markets and developing economies (EMDEs). Our paper reports several findings relevant to assessing the success of IT regimes. We find that while the early adopters of IT (pre-2000) all saw declines in inflation rates following adoption, IT adopters since then have enjoyed such success in only about half the cases. Since there is not much difference, on average, between IT and non-IT countries in mean inflation, inflation volatility and the extent of inflation anchoring, it is not easy to sort out what role IT has played in ensuring good outcomes; in particular, we cannot rule out the possibility that the success of IT may be due to ‘regression to the mean’. Our country-level analysis—using the Synthetic Control Method (SCM) to compare outcomes in IT countries to a synthetic cohort—shows that IT adoption delivers significant inflation gains in about a third of the cases. At the same time, we also find limited support for the concern that adoption of IT systematically leads to poorer growth outcomes. At a time when central banks are struggling to keep inflation in check, our results suggest that the belief that IT adoption will be sufficient to achieve this goal cannot be taken for granted.

Macroeconomics --- Economics: General --- Inflation --- Money and Monetary Policy --- Finance: General --- Business Fluctuations --- Cycles --- Expectations --- Speculations --- Price Level --- Deflation --- Monetary Policy --- General Financial Markets: General (includes Measurement and Data) --- Economic & financial crises & disasters --- Economics of specific sectors --- Monetary economics --- Finance --- Prices --- Inflation targeting --- Monetary policy --- Emerging and frontier financial markets --- Financial markets --- Currency crises --- Informal sector --- Economics --- Financial services industry --- Mexico

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Economic theory suggests that countries’ tariff commitments in trade agreements reflect their import market power at the time of negotiations. However, as countries grow, their market power in different sectors can change in unforeseen ways and their commitments may no longer reflect changed economic conditions. Using a newly built dataset of pre-Uruguay Round applied tariffs and relying on the theoretical framework of the terms-of-trade motive for trade agreements, we estimate hypothetical tariff commitments under current levels of market power and compare them with actual tariff commitments. We find that lower tariff commitments required to reflect current economic conditions would amount to a reduction in annual tariff costs of up to $26.4 billion – equivalent to nearly 10% of global tariff costs. Our results reveal substantial heterogeneity between countries and sectors. The sectors with the largest potential tariff cost reductions are vehicles (HS 87) and machinery and appliances (HS 84-85). Product-level tariff reductions would range from 0 to 18.5 percentage points and are on average largest for China. In the past, the GATT/WTO system has updated tariff commitments through periodic rounds of negotiations, and our findings support the revival of the WTO's negotiation function in this area.

Macroeconomics --- Economics: General --- Taxation --- Exports and Imports --- Neoclassical Models of Trade --- Trade Policy --- International Trade Organizations --- International Agreements and Observance --- International Organizations --- Trade: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Public finance & taxation --- International economics --- Tariffs --- Taxes --- Imports --- International trade --- Trade policy --- Trade agreements --- Currency crises --- Informal sector --- Economics --- Tariff --- Commercial policy --- Commercial treaties --- Uruguay

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In this paper we seek to answer the question of how the patterns of bilateral trade are altered by rising trade policy uncertainty (TPU). Specifically, we investigate whether geopolitical alignments between country pairs determine how bilateral trade flows react during periods of greater uncertainty. Using a structural gravity framework augmented with a text-based TPU index and a geopolitical distance measure based on UN General Assembly voting records, we find a significant negative effect of the latter when TPU is elevated, indicating a shift to trading among “friends” in uncertain times.

Macroeconomics --- Economics: General --- Exports and Imports --- Information, Knowledge, and Uncertainty: General --- Neoclassical Models of Trade --- Trade Policy --- International Trade Organizations --- International Relations and International Political Economy: General --- Empirical Studies of Trade --- Economic & financial crises & disasters --- Economics of specific sectors --- International economics --- Trade policy --- International trade --- Trade balance --- Plurilateral trade --- Trade tensions --- Trade barriers --- Currency crises --- Informal sector --- Economics --- Commercial policy --- Balance of trade

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After moving slowly downward for the better part of four decades, central bank gold holdings have risen since the Global Financial Crisis. We identify 14 “active diversifiers,” defined as countries that purchased gold and raised its share in total reserves by at least 5 percentage points over the last two decades. In contrast to the diversification of foreign currency reserves, which has been undertaken by advanced and developing country central banks alike, active diversifiers into gold are exclusively emerging markets. We document two sets of factors contributing to this trend. First, gold appeals to central bank reserve managers as a safe haven in periods of economic, financial and geopolitical volatility, when the return on alternative financial assets is low. Second, the imposition of financial sanctions by the United States, United Kingdom, European Union and Japan, the main reserve-issuing economies, is associated with an increase in the share of central bank reserves held in the form of gold. There is some evidence that multilateral sanctions imposed by these, and other countries have a larger impact than unilateral sanctions on the share of reserves held in gold, since the latter leave scope for shifting reserves into the currencies of other non-sanctioning countries.

Macroeconomics --- Economics: General --- Banks and Banking --- Investments: Metals --- International Finance: General --- Foreign Exchange --- International Monetary Arrangements and Institutions --- Monetary Policy --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Economic & financial crises & disasters --- Economics of specific sectors --- Banking --- Investment & securities --- Gold --- Commodities --- Gold reserves --- Central banks --- International reserves --- Reserve assets --- Gold prices --- Prices --- Currency crises --- Informal sector --- Economics --- Foreign exchange reserves --- Russian Federation