Essays on International Trade and Finance: An Empirical Assessment of Food Safety and Banking Crises

Abstract

This dissertation is composed of three chapters examining how food policy and bilateral tariff affect international trade, and how 2007-2008 global banking crises influence MFIs performance. Chapter 1 explores the impact of Hazard Analysis Critical Control Point (HACCP) implementation on U.S. seafood imports. I offer a novel method to evaluate the impact of trade policies within the gravity model and event-specific changes. I build a panel database of seafood imports affected by HACCP as well as data for food imports unaffected by HACCP between the U.S., the European Union's (EU) 15 countries and 217 partner countries from 1988 to 2006. I employ a causal framework of analysis, define a “treatment group” of seafood imports to the U.S. and use two alternative control groups. The first control group consists of comparable non-seafood U.S. imports, not subject to HACCP, while the second control group contains EU seafood imports for the period for which seafood imports to the EU were not subject to such regulation. Using the gravity model framework, we study how HACCP implementation in the U.S. influences the intensive and extensive margins of U.S. seafood imports and compare results from previously used truncated OLS to our preferred specifications. Contrary to previous work, we find that HAACP implementation has no effect on the volume of U.S. seafood imports, while the estimates of the other key variables are consistent across the models and similar to previous work. Thus, we demonstrate that a causal approach to evaluating trade policy within the gravity model and event-specific policy changes could lead to better policy insights. Chapter 2 focuses on the identifying what factors determine blue and green virtual water trade (VWT) across nations and tests whether the policy relevance of virtual water can be enhanced by considering the bilateral tariff, as well as whether virtual water has an endowment effect. To achieve this goal, I build a panel database on blue and green virtual water trade among paired trading countries from 1998 to 2002. Using an Anderson-van Wincoop (AvW) gravity model with fixed effects and estimating the Poisson Pseudo-Maximum Likelihood (PPML) specifications, I evaluate how the bilateral tariff affects the intensity of blue and green VWT. Results show that there are no obvious different effects between determinants of blue and green virtual water import, while there are differential effects among the determinants of VWT of 19 crops. Tariff has a negative effect on the blue and green virtual water import for more water intensive crops. Chapter 3 study how the spread of the financial troubles resulting from the 2007-2008 crisis affected these MFIs institutions’ ability to achieve their double bottom line to remain financially sustainable and to reach as many marginalized clients as possible. Our data consist of 2,611 MFIs from 118 countries and is for the 1999-2011 period. We employ the fixed and random effect model with Difference in Difference (DID) specification and control for country and organization-specific characteristics. Results show that the global financial crisis had a negative impact on the ability of MFIs to serve many clients (measured by the number of active borrowers). However, it did not affect financial sustainability (measured by return on assets) or depth of the outreach (measured by average loan balance per borrower over GNI per capita). This suggests that MFIs have dealt with the crises just like banks, namely restricting credit and serving fewer presumably larger borrowers, and global financial crisis has no effect on the poverty level, since MFI is more likely to hold back more reserve to reduce the risk. The impact of a banking crisis itself could affect MFI performance negatively, and these crises have been more devastating post the 2008 global financial crisis in term of breadth of outreach.