Economic sanctions are a frequently used tool of foreign policy. Constraining trade flows towards or from the target country is supposed to coerce its government into changing certain policies. However, sanctions constitute an obstacle to trade, thereby affecting flows of all countries,...

In this paper, we develop a political economy model to study the decision of representative democracies to join a preferential trading agreement (PTA), distinguishing between free trade areas (FTA) and customs unions (CU). Our theoretical analysis suggests that income inequality and bilateral...

How do exporting firms react to sanctions? Specifically, which firms are willing - or capable - to serve the market of a sanctioned country? We investigate this question for four sanctions episodes drawing on recent econometric advances in bias-corrected dynamic high-dimensional fixed effects...

We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the...

Bilateral trade balances often play an important role in the international trade policy debate. Disturbingly, several studies argue that the gravity model of trade fails when confronted with bilateral trade balances data, dubbing this "The Mystery of the Excess Trade Balances". Capitalizing on...

With ever-increasing political tensions between China and Russia on one side and the EU and the US on the other, it only seems a matter of time until protectionist policies cause a decoupling of global value chains. This paper uses a computable general equilibrium trade model calibrated with the...

Linking the EU and Chinese Emission Trading Systems (ETS) increases the cost-efficiency of reaching greenhouse gas mitigation targets, but both partners will benefit - if at all - to different degrees. Using the global computable-general equilibrium (CGE) model DART Kiel, we evaluate the effects...

How do firms of different sizes react to trade liberalization? Leading theories suggest that, amongst continuing exporters, lower trade costs should boost exports of smaller firms by the same or a greater rate than those of larger firms. However, studying the entry into force of the ambitious...

We study the stability of trade policy arrangements under two regulatory scenarios, with/without PTAs. Unlike previous papers, we consider an extensive set of trade policy constellations and allow for unlimited farsightedness of negotiating parties. We find global free trade (GFT) to be uniquely...

This paper studies the effects of protectionism as a business cycle instrument. In normal times, protectionism reduces international trade, distorts production and reduces output. However, in a liquidity trap protectionism lowers the real interest rate because inflation goes up while the nominal...