Book Project
Currency Wars in Retreat: How Global Value Chains Transform Exchange Rate Politics (manuscript in preparation)
As the most important price in a domestic economy, the exchange rate is an essential tool for politicians seeking the support of economic interest groups. An undervalued exchange rate supports domestic exporters of goods and services, as well as those who compete with foreign imports. Over the last 50 years, many countries maintained an undervalued exchange rate as a key factor in their development strategy -- e.g., China, Germany, Japan, South Korea, and Taiwan. This strategy, however, drew the ire of rich country governments who argued that this currency manipulation puts their domestic industries at a competitive disadvantage. Despite the success of this strategy for export-led growth and the lack of an international mechanism to punish currency manipulators, currency manipulation receded after its 2013 peak -- almost disappearing entirely in 2019 --, but reversed course during the COVID-19 pandemic. Currency Wars in Retreat provides a novel explanation for why governments might end their strategy of currency manipulation and what factors might spark a reversal.
I argue that the globalization of production over the last two decades, where firms increasingly rely on imported inputs to produce their final goods, has changed the conventional benefits of an undervalued exchange rate. When firms import more inputs, an undervalued exchange rate does not provide a competitive boost to exports and currency manipulation recedes; however, when a global shock disrupts production networks -- e.g., during the COVID-19 lock downs -- the benefits of an undervalued exchange rate can return, sparking a new, albeit smaller, bout of currency wars. I test the theoretical implications of my model of exchange rate politics using a mix of cross-country data, firm-level survey data, and elite interviews in Japan, South Korea, and Taiwan.
Today, global value chains account for more than 80% of global trade. An important contribution of this book is in its detailed explanation for how these value chains affect exchange rate politics, in particular, in reversing currency manipulation. I intend for the book to be accessible to advanced undergraduates, policymakers, as well as a general audience with some background knowledge of the subject matter.
I argue that the globalization of production over the last two decades, where firms increasingly rely on imported inputs to produce their final goods, has changed the conventional benefits of an undervalued exchange rate. When firms import more inputs, an undervalued exchange rate does not provide a competitive boost to exports and currency manipulation recedes; however, when a global shock disrupts production networks -- e.g., during the COVID-19 lock downs -- the benefits of an undervalued exchange rate can return, sparking a new, albeit smaller, bout of currency wars. I test the theoretical implications of my model of exchange rate politics using a mix of cross-country data, firm-level survey data, and elite interviews in Japan, South Korea, and Taiwan.
Today, global value chains account for more than 80% of global trade. An important contribution of this book is in its detailed explanation for how these value chains affect exchange rate politics, in particular, in reversing currency manipulation. I intend for the book to be accessible to advanced undergraduates, policymakers, as well as a general audience with some background knowledge of the subject matter.
Peer-Reviewed Publications [Google Scholar]
Lauren Peritz, Ryan Weldzius, Ronald Rogowski, and Thomas Flaherty. 2022. Enduring the Great Recession: Economic Integration in the European Union. Review of International Organizations 17: 175–203.
Scholars have long feared that regional economic specialization, fostered by freer trade, would make the European Union vulnerable to economic downturn. The most acute concerns have been over the adoption of the common currency: by adopting the euro, countries renounce their ability to meet an asymmetric shock with independent revaluations of their currencies. We systematically test the prediction that regional specialization increases vulnerability to economic downturn using a novel dataset that covers all of the EU’s subnational regions and major sectors of the economy between 2000 and 2013. We find that, contrary to conventional wisdom, the most specialized regions actually fared better during the 2008-09 global financial crisis. Specialized regions performed worse only in states that remained outside the Eurozone. The heightened vulnerability of non-Eurozone states cannot be attributed to fiscal or social policy failures. Rather, our results suggest the common currency may have helped Eurozone members share risk. This bodes well for the resiliency of the EU, even as it navigates another economic downturn from the asymmetric impact of the novel coronavirus.
Paper: [link]
Appendix: [download]
Paper: [link]
Appendix: [download]
Ryan Weldzius. 2021. The End of Currency Manipulation? Global Production Networks and Exchange Rate Outcomes. Economics and Politics 33(3): 514-32.
Between 2000 and 2017, eight major exporting countries engaged in currency manipulation in order to increase their trade surpluses with the rest of the world. As of 2018, however, no country continued to manipulate its currency. This change in policy is puzzling given the past successes of this export-led growth model. I argue that the state-level decision to stop depreciating its exchange rate stems from the reduced benefits and increased costs of currency manipulation. As production becomes more global, the increase in traded inputs decreases the traditional benefits of a depreciated currency, in particular, an increase in exports. Utilizing panel data across 70+ states between 2000 and 2018, I demonstrate that global production networks moderate the traditional relationship between export-dependence and currency manipulation. I further discuss how this relationship may reverse given the reshoring of production networks in response to the novel coronavirus pandemic.
Paper: [link]
Appendix: [download]
Paper: [link]
Appendix: [download]
Jennifer Ifft, Deepak Rajagopal, and Ryan Weldzius. 2019. Ethanol Plant Location and Land Use: A Case Study of the Conservation Reserve Program and Ethanol Mandate. Applied Economic Perspectives and Policy 41(1): 37-55.
This study uses a county-level difference-in-difference framework to estimate the share of re-enrollment into the Conservation Reserve Program (CRP) in response to local ethanol production capacity after the Renewable Fuels Standard (RFS). Relatively more land remained in CRP in ethanol-intensive areas after the RFS. This seemingly counter-intuitive result can be explained by post-RFS changes to the CRP that favored ethanol-intensive areas. Both CRP design changes and production trends correlated with ethanol plant location pose challenges for empirical strategies that use ethanol plant location to study production or land use decisions. Changes to CRP policies can play an important role in participation and land use decisions.
Paper: [link]
Paper: [link]
Other Publications
Weldzius, Ryan, James Raymond Vreeland, and James H. Bisbee. 2022. "Political Cleavages and Exposure to the Global Financial Crisis" in The Backlash Against Globalization: What's Next? a Report from the Niehaus Center for Globalization and Governance: pp. 33-37.
Report: [link]
Ryan Weldzius. 2019. Review of Currency Statecraft: Monetary Rivalry and Geopolitical Ambition, by Benjamin J. Cohen. Perspectives on Politics 17(3): 945-6.
Review: [link]
World Trade Report 2014 - Trade and Development: Recent Trends and the Role of the WTO. Geneva: World Trade Organization.
Report: [link]
Under Review
The Greenback in a Green World: Currency Power Dynamics During the Green Transition (with Joshua Buckson)
How does international currency power shift in response to structural changes in the global economy? We develop a general framework for analyzing the dynamics of currency power, focusing on how shifts in trade patterns and commodity demand affect the international usage of currencies. We argue that changes in the distribution of currency power are shaped by two key factors: (1) the availability and liquidity of a currency for international exchange and (2) the geopolitical and economic relationships between trading partners and currency issuers. This framework allows us to move beyond monetary policy or reserve status alone to capture the strategic role of currencies in the international political economy. To evaluate the theory, we access two modern cases in which there was a shock to . First, we examine the case of the global green energy transition, in which the shift from fossil fuels to clean energy technologies can affect the usage of currencies in international commodity markets. In particular, we focus on the electric vehicle sector to illustrate how geopolitical rivalries---especially among the United States, China, and the European Union---affect currency preferences in green global value chains. Second, and still in progress, we analyze the 2025 Trump trade war to assess how renewed protectionism and bilateral trade tensions influence the strategic deployment and uptake of currencies in international transactions. Together, these cases demonstrate how structural economic change and geopolitical contestation shape the evolution of currency power.
The Currency Race for Second Place: How Global Structural Shifts Reshape Monetary Hierarchies
A generational shift in energy and production technologies is reshaping the global economy and, with it, the foundations of international monetary power. As global exchange moves away from oil and toward critical minerals and renewable-energy value chains, patterns of interdependence increasingly favor sectors where incumbent monetary powers are less embedded and rising powers are more central. We argue that these technological realignments can reorder currency hierarchies by altering the transaction-cost structure that governs cross-border currency use. Sectoral dominance, supply-chain centrality, and state-built monetary infrastructure each lower the costs of invoicing and settlement in a challenger currency. Historical evidence from 1870–1913 shows how British control over coal production and processing sustained sterling’s primacy even as the United States accumulated the industrial and financial capacities that elevated the dollar into a credible second position—and, after World War I, eventual leadership. Contemporary patterns in critical-mineral and green-technology supply chains suggest a parallel dynamic for the renminbi (RMB): China’s dominance in refining, its bilateral financing instruments, and its strategic partnerships increasingly reduce frictions for RMB use. The analysis does not predict the displacement of the dollar. Rather, it shows how the green transition could furnish the structural conditions for China to consolidate a stronger claim to second place for the RMB. Technological realignments in global value chains thus emerge as an under recognized driver of adjustment within a monetary system defined less by outright rivalry for hegemony than by strategic competition beneath the dollar.
Breaking the Chains of Trust: The Politics of Reshoring Global Supply Chains
The COVID-19 lockdowns caused myriad disruptions in international trade, leaving strategically important industries vulnerable to a break in their global supply chains. Despite a decade-long retreat from globalization, only three governments allocated funds to re-shore these vulnerable supply chains—Japan, South Korea, and the United States. What explains these governments’ decision to prioritize the re-shoring of vulnerable supply chains while other governments chose to maintain the status quo? We argue that a home government will allocate funds to incentive the re-shoring of foreign production from a country if (1) the home country is highly dependent on the foreign country for inputs, (2) the home government has a high level of distrust for this foreign government, and (3) the inputs are of strategic national importance. We test this argument using a comparative case study, matching cases on observable covariates. We find that home governments are more likely to allocate funds for high research and development sectors if the sector is dependent on an adversarial trading partner, but home governments are less likely to incentivize the re-shoring of vulnerable supply chains if the bilateral strategic relationship is strong.
Monopolies for Sale? The (Anti-)Competitive Effects of Free Trade Agreements (with Nils Gudat)
Why do some industries experience persistent productivity gains and competitive pressures from trade liberalization, while others see these effects fade or even reverse over time? Moreover, does firm-level lobbying explain these latter effects? Standard models of international trade predict uniform competitive responses, yet empirical outcomes remain uneven and often puzzling. This paper tests the predictions of the Melitz-Ottaviano model of international trade with heterogeneous firms, focusing on the dynamics of aggregate prices, markups, and productivity in response to tariff reductions and increased trade openness. We derive regression equations from the model’s equilibrium conditions to separately identify short- and long-run effects. %including those stemming from third-country trade liberalization. We estimate this framework using sectoral data across NAFTA member countries---Canada, Mexico, and the United States---from 1988 to 2008 as well as the US–Korea Free Trade Agreement (KORUS-FTA), leveraging firm-level lobbying data from LobbyView to explore the political economy of trade liberalization. Consistent with the model, we find that trade openness exerts pro-competitive effects in the short run, lowering prices and markups while boosting productivity, but these gains often erode in the long run. Using lobbying data, we show that these anti-competitive long-run outcomes stem from the endogenous role of industry lobbying, suggesting monopolies are indeed for sale.
Working Papers & Works in Progress
Political Cleavages and Exposure to the Global Financial Crisis (with James Raymond Vreeland, and James H. Bisbee)
Can a financial crisis tip the domestic balance of power between the winners and losers of globalization? In this paper, we trace that roots of contemporary elite polarization in American politics to the differential impact of the 2008 global financial crisis. We examine firms’ corporate campaign contributions and lobbying expenditures before and after the financial crisis, finding that firms more insulated from the crisis experience a relative increase in their political expenditure profiles. We then identify the recipients of these expenditures, tracing the inversion of political capital to the proliferation of less mainstream candidates in federal elections. Our findings provide a causal mechanism through which elite polarization has grown in American politics: exposure to the global financial crisis caused a shift in political capital from the incumbent winners from globalization to anti-globalization challengers.
Summary found in Report from the Niehaus Center for Globalization and Governance at Princeton University:link
Paper: download
Summary found in Report from the Niehaus Center for Globalization and Governance at Princeton University:
Paper: download
Economic Interdependence and Regional Monetary Policy Convergence
Does increased economic dependence on an issuer of an international currency impact domestic monetary policy? I argue that as a country becomes more dependent on a foreign country for its domestic economic well-being, there are increased costs from diverging in monetary policy. This is especially the case for those economically dependent on a country that issues an international currency, that is, a currency used outside its national borders. Convergence in monetary policy decreases the transaction costs for firms that transact in the international currency; divergence in monetary policy, likewise, increases those transaction costs. Economic dependence, consequently, begets monetary policy convergence. I test this theory of monetary policy convergence using bilateral, time-series cross-sectional data between 33 countries and five international currency issuers — China, Euro Area, Japan, United Kingdom, and United States — from 2000 to 2019. I find strong support that economic interdependence in the manufacturing sector leads to convergence in monetary policy (overnight interest rates) and monetary outcomes (exchange rates and inflation). Importantly, China is the only international currency bloc that exhibits convergence in monetary policy with deeper economic dependence; in fact, the US currency bloc consistently exhibits divergent monetary policies as economic dependence with the US increases. These findings point to the emergence of a Renminbi bloc, which I suggest is an outcome of China’s strategy to promote the use of the yuan outside of China, in particular through bilateral swap agreements.
Predicting Revealed Trade Preferences: A Factor Content Approach.
The field of international political economy has relied upon the Heckscher-Ohlin model of factor endowments to predict individual trade-policy preferences for several decades. However, prior work in the field of economics has shown that a country’s factor endowment only correctly predicts the direction of trade 50% of the time. In this paper I include a critical assumption from the Heckscher-Ohlin model in my empirical strategy, which provides a better fit to the data than all prior studies on individual trade preferences. Instead of assuming that the abundant factor in an economy is used intensively in the production of export goods, I include the factor intensity and the direction of trade for each individual’s industry of employment. I show that this factor content of trade approach better fits the data than a simple factor endowment approach. Moreover, although low-skilled labor exhibits consistent anti-trade preferences, the individual preferences of high-skilled labor depends largely upon the factor intensity of the individual’s industry of employment.
Path-Dependent Explanations of Equality and Growth: A Comparative Historical Analysis of Land Reform Programs in East Asia.
The economies in South Korea and the Philippines diverged beginning in 1960, with Korea sustaining “miraculous” growth for the next quarter century, transforming into a modern industrial state, while the Philippines stagnated, remaining a poor agrarian society. Although the two countries shared strikingly similar macroeconomic indicators in the early 1960s, they differed on a critical indicator: income distribution. In this paper, I utilize path-dependency to illustrate how Korea emerged from its colonial past with a relatively more equal distribution of income than the Philippines in 1960. Successful redistributive land reform in Korea after World War II created an environment that was more conducive to future industrialization. In contrast, land reform did not occur in the Philippines due to the weakened position of the peasantry from a decade long U.S. supported counterinsurgency, leaving the country in a low-output poverty trap. The analysis illustrates how land reform is largely used as a mechanism for countering peasant rebellions and how the unintended consequences of such reforms are conducive for industrialization and long-term economic growth.
Land Reform and Divergence in Economic Growth: Evidence from India.
Using panel time-series data from 1957-1992, Besley and Burgess (2000) find that land reforms across sixteen Indian states had an appreciable effect on poverty reduction, but at the cost of depressed economic growth. Using an amended data set that can more precisely locate the partial equilibrium effects from land reform, this analysis of the Indian land reform story gives further support to the findings of Besley and Burgess, as well as analyzes how agricultural reforms in a subsistence economy can create the foundation for future economic growth by supplying labor to the manufacturing sectors in the industrialized core. Finally, the paper adds to the debate on “good” institutions by looking at how the political reaction to a peasant-based social movement affected the political disposition in India and the effective implementation of land reforms.
The Chains that Bind: How Global Value Chain Integration in the EMU Buffers Global Shocks.
This paper examines whether global value chain (GVC) integration can buffer regional economies in the European Union against major global shocks. Focusing on NUTS-2 regions, it analyzes two crises with distinct characteristics: the 2009 Global Financial Crisis and the 2020 COVID-19 shock. Building on theories of endogenous optimum currency areas, the study argues that deep production networks, beyond trade alone, can function as a form of private risk-sharing by binding regions into durable cross-border supply relationships. Using regional panel data and multilevel models, the analysis shows that during the financial crisis, highly specialized regions and regions more deeply integrated into euro-area GVCs experienced smaller economic contractions, particularly within the euro area. In contrast, these buffering effects largely disappear during the COVID-19 crisis, where sectoral exposure and the nature of the shock overwhelm the stabilizing role of production networks. The findings suggest that GVC integration can mitigate conventional demand-driven shocks in a monetary union, but offers limited protection against global disruptions that simultaneously fracture supply and demand.