The academic work of the Clausen Center is organized around four initiatives.
The first initiative, Financial Globalization, seeks to gain a better understanding of the complex and rapidly changing international financial landscape. As economies become more financially inter-twinned, researchers are reassessing the effectiveness of traditional macroeconomic policies, the cross-border spillover effects of macroeconomic and financial policies, and the desirability of coordinating policies internationally.
The second initiative, International Financial Architecture, explores issues associated with currency wars and the role of the US dollar as a reserve currency, the evolving nature of financial fragilities in advanced and developing nations, the regulation and supervision of financial institutions and markets, and the role of international organizations such as the International Monetary Fund in dealing with sovereign and external crises.
The third initiative on International Trade and Development seeks to understand the connection between economic integration and economic development. Economic integration with the rest of the world has been a central feature of rapid-growth experiences in the last decades, but many countries have not reaped the expected benefits. This initiative explores the conditions under which more open trade and investment policies promote development to better guide welfare-increasing policies.
The final initiative, International Business Education, supports the practice of international business and policy through executive education, and it stimulates academic dialogue by bringing business leaders and policy makers to the classroom. This initiative recognizes that business is shaped by international trade, foreign direct investment, cross-border portfolio flows, migration, and policies on intellectual property, regulations, and taxes. Executive education training on these issues enhances the ability of professionals working in the private and public sectors to make sound evaluations and decisions about global economic challenges.
Recent Working Papers
In Innocent Bystanders? Monetary Policy and Inequality in the US, Yuriy Gorodnichenko and co-authors Olivier Coibion (UT Austin), Lorenz Kueng (Northwestern U), John Silvia (Wells Fargo) study the effects of monetary policy shocks on—and their historical contribution to—consumption and income inequality in the United States since 1980 as measured by the Consumer Expenditures Survey. They find that contractionary monetary policy systematically increases inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary policy shocks account for a non-trivial component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, they document some of the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy. Monetary policy therefore may well have played a more significant role in driving recent historical inequality patterns in the U.S. than one might have expected.
In Micro to Macro: Optimal Trade Policy with Firm Heterogeneity, Andres Rodriguez Clare with Arnaud Costinot (MIT), Ivan Werning (MIT) address the implications of the empirical observation that “large firms tend to export, whereas small firms do not.” They emphasize that this observation has transformed the way economists think about the determinants of international trade. Yet, it has had surprisingly little impact about how economists think about trade policy. The goal of this work is to fill this large gap on the normative side of the literature and uncover the general principles that should guide the design of optimal trade policy when heterogeneous firms select into exporting. In their paper, they characterize optimal trade policy in a generalized version of the trade model with monopolistic competition and firm-level heterogeneity developed by Melitz (2003). At the micro-level, they find that optimal import taxes discriminate against the most profitable foreign exporters, while optimal export taxes are uniform across domestic exporters. At the macro-level, they demonstrate that the selection of heterogeneous firms into exporting tends to create aggregate nonconvexities that dampen the incentives for terms-of-trade manipulation, and in turn, the overall level of trade protection.