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Mr. Rabah Arezki, Valerie A Ramey, and Liugang Sheng
This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output ? the delay between a discovery and production is on average 4 to 6 years. We first present a two-sector small open economy model in order to predict the responses of macroeconomic aggregates to news of an oil discovery. We then estimate the effects of giant oil discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil discovery, the current account and saving rate decline for the first 5 years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, while GDP does not increase until after 5 years. Employment rates fall slightly for a sustained period of time.
Sophia Chen, Ms. Deniz O Igan, Mr. Nicola Pierri, and Mr. Andrea F Presbitero
We use high-frequency indicators to analyze the economic impact of COVID-19 in Europe and the United States during the early phase of the pandemic. We document that European countries and U.S. states that experienced larger outbreaks also suffered larger economic losses. We also find that the heterogeneous impact of COVID-19 is mostly captured by observed changes in people’s mobility, while, so far, there is no robust evidence supporting additional impact from the adoption of non-pharmaceutical interventions. The deterioration of economic conditions preceded the introduction of these policies and a gradual recovery also started before formal reopening, highlighting the importance of voluntary social distancing, communication, and trust-building measures.
Steven Pennings and Mrs. Esther Perez Ruiz

Should fiscal consolidations be front-loaded or proceed at a more steady pace, and how does this affect growth? We make an attempt to address this question using a three-step methodology. First, we modify a standard regression of growth on consolidation size to allow speed to affect the multiplier. Second, using the narrative dataset of Devries and others (2011), we construct a new sample of multi-year consolidation episodes for 17 advanced economies over 1978-2009. Third, we develop a novel concept of speed to measure the pace of the consolidation episodes identified in the data. The main empirical finding is that fast episodes have higher multipliers than gradual consolidations. This provides some preliminary support for consolidating at a steady pace, market access and a credible adjustment plan permitting. However, as the sample size is small, identifying mechanisms and testing robustness is difficult, and so our findings should not be interpreted causally.

Mr. Rabah Arezki, Valerie A Ramey, and Liugang Sheng

predictions about the current account based on the intertemporal budget constraint of an open economy. Testing the present value model is difficult, though, because there are few direct measures of expectations about future output or productivity. Typically, time series methods are used to identify effects, but often the results are sensitive to the particular assumptions used (e.g. Ghosh and Ostry (1995) , Bergin and Sheffrin (2000) , Corsetti and Konstantinou (2012) ). We find evidence for a statistically and economically significant anticipation effect on the current

Mrs. Swarnali A Hannan

. Estimating trade impacts using SCM would thus be a novel way of addressing the endogeneity bias problem in trade literature. Using SCM approach to the gravity model, this paper looks at 104 country pairs that had trade agreements in the period 1983–1995. The paper finds that trade agreements can generate substantial gains, on average an export boost of 80 percentage points over ten years. The annual export growth is 3.8 percentage points higher due to trade agreements. Overall, the export gains are even higher when the anticipation effect – trade increasing before the

Mr. Enzo Croce, Mr. V. Hugo Juan-Ramon, and Mr. Feng Zhu

RTA might have an impact on trade either before (an “anticipation effect”) or after (a “lagging effect”) the official signing. An anticipation effect may arise when it takes a long time to negotiate a deal but there is a strong presumption that the deal will come to fruition. In these cases trade might increase even before the official inauguration. A lagging effect may arise when it takes a long time to implement the provisions of the treaty after its signing, possibly casting doubts about the seriousness of the agreement. Which effect dominates is an empirical

Mr. Enzo Croce, Mr. V. Hugo Juan-Ramon, and Mr. Feng Zhu
We study the performance of the four Western Hemisphere trading blocs during the period 1978-2001. For the North American Free Trade Agreement (NAFTA), trade integration outweighed trade diversion; for MERCOSUR, increased integration and trade diversion went hand in hand; for the Central American Common Market (CACM) and the Andean Community, the evidence points to trade diversion only. We also find that trade among neighboring countries has increased since the early 1990s. The estimations are based on a nonlinear gravity equation that incorporates the hypothesis that exports create externalities that affect trade costs. This hypothesis might help reconcile the theoretical unitary income elasticity with most empirical findings of a non-unitary income elasticity in studies using the gravity equation.