Book Description

This dissertation is comprised of three chapters focusing on international trade policy and trade finance. My first chapter studies the effects of trade policy uncertainty on US firms' global value chain relationships. Using earnings call transcripts, I apply a text-based method to measure the trade policy uncertainty perceived by firms. With the new measures, I then estimate the effects of trade policy uncertainty shocks on firms' investment, inventory, and global adjustment in the supply chain. I find that US firms' foreign customers are negatively associated with trade policy uncertainty. In contrast, their foreign suppliers are not significantly associated with trade policy uncertainty, implying that US firms have a strong reliance on foreign supply. In my second chapter, I study the interdependence between trade policy and capital control from a terms-of-trade manipulation perspective. I extend the dynamic two-country multi-good endowment economy in Costinot et al. (2014) with trade taxes. Home country chooses optimal taxes on all tradable goods and international capital flows to maximize domestic welfare, while the foreign country is passive. When only good-specific trade taxes/subsidies are available, Home has an incentive to manipulate tariffs to depreciate its real exchange rate, if it has faster-growing endowment than the Foreign. Moreover, I find that taxing capital inflow is equivalent to a uniform reduction in trade tariffs on all goods. My third chapter studies how firms determine payment methods and transportation modes jointly in international trade. This chapter incorporates choices of transportation mode into a model of trade finance, and exploits Chilean import data to examine the model's implications. In cash-in-advance or post-shipment payment cases, firms use fast transportation to reduce financial costs caused by delayed repayment for borrowers and mitigate non-payment risk of importers. Meanwhile, it creates a high freight cost. In contrast, a letter of credit separates the goods shipment and payment flow in practice and substitutes trading partners' default risk with banks' credit risk.vEmpirical analysis reveals that a transaction using airborne cargo is less likely to be on a letter of credit.