International Institutions and Domestic Politics: Can Preferential Trading Agreements Help Leaders Promote Economic Reform?

Baccini, Leonardo; Urpelainen, Johannes

doi:10.1017/s0022381613001278

Cited by 64 publications

(31 citation statements)

References 45 publications

(56 reference statements)

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“…6 The magnitude of the bias is a function of the variances and covariances of X and U as well as magnitude of the causal effect of the unobserved confounder:…”

Section: Analytical Resultsmentioning

confidence: 99%

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Lagged Explanatory Variables and the Estimation of Causal Effects

2015

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Across the social sciences, lagged explanatory variables are a common strategy to confront challenges to causal identification using observational data. We show that "lag identification"-the use of lagged explanatory variables to solve endogeneity problems-is an illusion: lagging independent variables merely moves the channel through which endogeneity biases causal estimates, replacing a "selection on observables" assumption with an equally untestable "no dynamics among unobservables" assumption. We build our argument intuitively using directed acyclic graphs, then provide analytical results on the bias resulting from lag identification in a simple linear regression framework. We then present simulation results that characterize how, even under favorable conditions, lag identification leads to incorrect inferences. These findings have important implications for current practice among applied researchers in political science, economics, and related disciplines. We conclude by specifying the conditions under which lagged explanatory variables are appropriate for identifying causal effects.

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“…6 The magnitude of the bias is a function of the variances and covariances of X and U as well as magnitude of the causal effect of the unobserved confounder:…”

Section: Analytical Resultsmentioning

confidence: 99%

“…While this is plainly not an unbiased estimate of β, 9 one hope is that lag identification will 6 We use Greek letters for population coefficients and Latin letters for sample coefficients. 7 Based on the DGPs in Equations 1-3, one can also derive Cov(X, U ).…”

Section: Analytical Resultsmentioning

confidence: 99%

Lagged Explanatory Variables and the Estimation of Causal Effects

2015

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“…Political freedom is taken from Freedom House. It is worth noting that our preference for the aforementioned institutional proxy is motivated by the recent findings of the political science literature, see for example Baccini and Urpelainen (2014) [45] and Buthe and Milner (2008) [46]. In particular, it has been shown that there is a nexus between domestic and international politics for attracting FDI and that the higher the commitment and credibility of domestic policy choices, the higher the FDI.…”

Section: Methodsmentioning

confidence: 99%

FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America

Bianco

Loan²

2017

IJFS

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This paper investigates the impact of price and real exchange rate volatility on Foreign Direct Investment (FDI) inflows in a panel of 10 Latin American and Caribbean countries, observed between 1990 and 2012. Both price and exchange rate volatility series are estimated through the Generalized Autoregressive Conditional Heteroscedasticity model (GARCH). Our results obtained, employing the Fixed Effects estimator, confirm the theory of hysteresis and option value, in so far as a statistically significant negative effect of exchange rate volatility on FDI is found. Price volatility, instead, turns out to be positive but insignificant. Moreover, we show that human capital and trade openness are key for attracting foreign capital. From the policy perspective, our analysis suggests the importance of stabilization policies as well as the policy of government credibility in promoting trade openness and human capital formation.

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“…Importantly, the effectiveness of BTAs is also determined by the scope and extent of commitments agreed upon [12,13]. BTAs are very diverse in content and design, reflecting that they might have been negotiated to serve other, strategic (and possibly non-economic) purposes as well [13,14], e.g., underpinning politically motivated partnerships between countries, increasing bargaining power in trade negotiations with third countries or fostering liberal economic policy reforms at the domestic level [15]. Identifying and assessing the relative importance of the various possible objectives that might drive the negotiations proves difficult and is often a matter of interpretation of the final agreement [14].…”

Section: Introductionmentioning

confidence: 99%

Bilateral Trade Agreements and the Interconnectedness of Global Trade

2018

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Over the last decades, bilateral trade agreements (BTAs) have increased considerably in number and economic relevance. Notably, such agreements substantially affect global trade, since the reorganization of flows of goods and services has prominent impacts on the contracting countries' economies, but also on other parties that are (directly or indirectly) engaged in trade with these countries. Here, we empirically study the effect of BTAs on the input-output linkages between the contractual parties' national economic sectors by defining a new measure of Trade Interconnectedness (TI), which describes the relative importance of direct and indirect production linkages between the two countries in the international trade network. By analyzing its time evolution for each pair of trade agreement partners, we demonstrate that while most BTAs are succeeded by an increase in TI between the contractors, there are some notable exceptions. In particular, comparing the trade profiles of China and the United States (US), we find indications that both countries have been pursuing fundamentally different objectives and strategies related to the negotiation of BTAs.

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International Institutions and Domestic Politics: Can Preferential Trading Agreements Help Leaders Promote Economic Reform?

Cited by 64 publications

References 45 publications

Lagged Explanatory Variables and the Estimation of Causal Effects

Lagged Explanatory Variables and the Estimation of Causal Effects

FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America

Bilateral Trade Agreements and the Interconnectedness of Global Trade

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