Thomas H. Baranga
Phone: (858) 822-2877
Fax: (858) 534-3939
UC San Diego, IR/PS
9500 Gilman Dr.
San Diego, CA 92093-0519
Ph.D., Harvard University, 2009 (economics)
B.A., Balliol College, Oxford, 2002 (philosophy, politics, and economics)
Thomas Baranga’s research interests are in international trade, international finance and macroeconomics. His doctoral thesis explored the effects of exchange rate regimes on international trade. He is currently working on the effects of the financial crisis on trade flows, and the interactions of housing and labour markets.
Thomas Baranga joined the School of International Relations and Pacific Studies in the fall of 2009, and will be teaching the open-economy macroeconomics section of international economics and fiscal and monetary policy, and the economics of trade policy.
Bilaterally fixed exchange rate regimes have positive spillovers. Two clients pegging to the same anchor indirectly stabilise their bilateral exchange rates. Modelling exchange rates arrangements as a network formalises these spillovers and generates a measure of the stability of exchange rates, both for individual currencies and the global system. This stability measure is used as an instrument for countries' bilateral exchange rate regime in a gravity equation. IV estimates of the effect of currency unions and fixed exchange rates on trade are dramatically lower than OLS estimates.
The formation of the euro is treated as a natural experiment with which to estimate the effects of fixed exchange rate regimes on trade flows. 32 countries fixed their currencies against the DM or FFr prior to the formation of the euro, and have continued to fix against the euro since 1999. On the euro's formation these countries came to adopt a fixed exchange rate against the other Eurozone members in addition to their original anchor. These `exogenous' changes in exchange rate regime yield significantly lower estimates of the effect of a peg on trade than the full set of pegs. Standard estimates may be inflated by countries' tendency to select into a fixed exchange rate regime with a major trading partner.
Some widely used trade databases do not distinguish between zero and unreported trade flows. The number of unreported trade flows is high but they account for a small volume of world trade, so the distinction may be unimportant for traditional gravity equation estimation. However, techniques that separately estimate the intensive and extensive margins of trade may be more sensitive to the distinction. This paper develops a methodology to consistently estimate the Helpman, Melitz and Rubinstein model when some trade is unreported. This also breaks the relationship between the sample selection and heterogeneity correction terms, reducing collinearity of the regressors. A natural exclusion restriction identifies the model, removing the need to distinguish fixed from variable costs of trade.