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WORK IN PROGRESS

International Value-Added Linkages in Development Accounting, July 2017 (joint with A. Cuņat).

We show that, in addition to factor endowments and productivity, relative factor costs are a source of real-income variation among open countries. In turn, these are determined by bilateral trade frictions (which underpin the patterns of "international value-added linkages") and the global distribution of factor endowments and final expenditures. We use trade theory and international input-output data to back out the relative factor costs of 40 major economies. Introducing them into development reduces the variation in residual TFP required to explain the per-capita income differences in this sample by more than one half.

VoxEU article (non-technical); Universität Wien Medienportal (non-technical, in German)

Friends Without Benefits? - New EMU Members and the "Euro Effect" on Trade, R&R, Journal of International Money and Finance, October 2017 (joint with A. Mika).

We re-visit the evidence about the trade benefits of European Monetary Union (EMU), focusing on the experience of countries which adopted the common currency since 2002. Based on i) "state of the art" gravity estimations for the period 1992-2013, and ii) pseudo out-of-sample forecasts of trade flows for recent euro joiners, we conclude that candidate countries for euro accession should not expect euro membership to result in a significant boost to their trade.

ESE Focus Paper (non-technical)

Gravity across Space and Time, Submitted, December 2015 (joint with M. Klasing and P. Milionis).

This paper provides the first systematic attempt to assess how well the standard gravity equation can account for the evolution of global trade flows between 1870 and 2005. Our findings highlight two major puzzles: (i) the standard gravity model can only explain a small share of the variation in trade flows over time, and (ii) it requires very large time-invariant trade costs to match the average value of trade flows between country pairs. We also provide evidence that relaxing the assumption of a constant trade elasticity may go a long way in resolving these puzzles and reconciling the gravity equation with the experience of globalisation history.

Input Trade Over the Cycle, April 2012.

The value of total input purchases relative to total output is strongly procyclical in the U.S. economy. This cyclical pattern of intermediates purchases is at odds with the predictions of standard real business cycle models. I show that it can be explained in a setting in which labour and intermediate goods are substitutes in the production of final goods, and firms cannot adjust the size of their workforce instantaneously.