Essays in International Macroeconomics and Trade

Motivated by recent monetary expansion in the United States in the aftermath of the 2007-8 financial crisis, we use a New Keynesian three-country Center-Periphery model to define a game between policymakers in emerging economies linked to some large industrial economy via the exchange rate. We derive welfare-based payoffs to study the policy implications of monetary expansion in the US. We highlight cases in which policy coordination between emerging economies may improve their welfare. We identify cases in which countries may prefer to manipulate the exchange rate and resist currency appreciation.
We then propose a framework based on results from a Global Vector Autoregressive Model. This approach allows us to treat the emerging economies according to the observed data. We use US, Chinese and Brazilian data on consumption, output and money supply between 1994 and 2014. We perform counterfactual analysis allowing to determine the welfare outcomes of joint monetary expansions: in the US and China, in the US and Brazil, and in all three countries.
Our results are relevant for the ongoing discussion on the benefits of policy coordination and the spillover effects of monetary policy of a large industrial country on emerging economies and suggest that this framework can be used as a tool to coordinate countries on welfare-superior outcomes relative to Nash equilibrium.
In the third essay we consider an N-country two-good Cobb-Douglas model with country specific preferences and arbitrary endowments. This allows us to look at the interactions between asymmetric countries. We provide a general existence result which we then apply to our specific endowment economy, and provide conditions on the prim- itives of the model that ensure the existence of a pure strategy Nash equilibrium. We show that Nash equilibria with prohibitive tariffs cannot arise.