Three Essays on International Economics

<p dir="ltr">This dissertation investigates the interrelated dynamics of exchange rates, trade integration, and global production networks—three pillars that shape the contemporary international economic system. Using data spanning nearly three decades and covering a broad range of countries, each essay contributes to a deeper understanding of how exchange rate movements influence labor markets and global value chain (GVC) participation.</p><p dir="ltr">The first essay examines the impact of real exchange rate undervaluation on employment shares across tradable sectors. The findings indicate that while employment share in agriculture and mining benefits from undervaluation, these gains diminish as trade integration deepens. Manufacturing employment share increases primarily when supported by trade integration through trade agreements. Integration tends to reduce employment in wholesale and retail trade—sectors typically classified as less tradable. These results highlight the importance of sequencing labor market policies based on the channels of trade integration within export-oriented development strategies.</p><p dir="ltr">Building on this foundation, the second essay delves into the roles of exchange rate movements and dominant currency invoicing in global value chains. The analysis shows that while all GVC production is highly sensitive to dollar movements in short term, real exchange rate fluctuations also significantly affect backward GVC participation. When trade is invoiced in a dominant currency (US dollar in this study), dollar appreciation dampens GVC production, particularly on the import side, though invoicing more trade in dollar can alleviate some short-term disruptions. The degree of these effects vary according to the structure of the value chain and a country’s invoicing practices, suggesting that tailored strategies are crucial for enhancing trade resilience and optimizing value-added trade integration.</p><p dir="ltr">The final essay examines the bidirectional relationship between dollar-invoiced trade and bilateral GVC flow using a Two-Stage Least Squares (2SLS) instrumental variables approach. The results reveal a robust and negative bidirectional relationship: greater reliance on the dollar in trade constrains deeper GVC integration, while increased participation in GVCs, in turn, reduces dollar dependence. These patterns are sensitive to exchange rate volatility, underscoring the complexity of policy trade-offs under uncertainty.</p><p dir="ltr">Collectively, these essays underscore the need for nuanced and context-specific economic policies to navigate the evolving landscape of international trade and production.</p>