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. The Exporters’ Paradox 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 Czechia, Japan, South Korea, and Taiwan. Today, global value chains account for more than 70% 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 undergraduate students, policymakers, as well as a general audience with some background knowledge of the subject matter.

Why have only some governments committed substantial public funds to reshoring strategic production, even as supply chain vulnerabilities have become widely visible? Since 2020, a small number of advanced economies—including the European Union, Germany, India, Japan, South Korea, Taiwan, and the United States—have announced more than $300 billion in subsidies to repatriate semiconductor, pharmaceutical, and advanced manufacturing production, while many similarly exposed countries have done nothing. This book develops a political economy framework to explain that variation. At its core, the argument is simple: governments reshore when they are vulnerable enough to worry, distrustful enough to act, and capable enough to succeed. More formally, reshoring requires the alignment of three conditions: dependence that is significant but not prohibitively costly to unwind, low bilateral trust toward the supplier country, and sufficient domestic capacity to scale production. The framework extends the trust mechanism to encompass compound exposure, where dependence on a trusted partner becomes intolerable when that partner is itself vulnerable to disruption by a hostile power. While general, the empirical focus is on dependence on China, which dominates contemporary reshoring debates. The argument is tested through cross-national analysis (2007–2025) and three matched case studies: the United Kingdom and Germany (vulnerability), India and Mexico (trust), and the United States and Australia (capacity), drawing on fieldwork and interviews conducted between 2024 and 2026. The book shows that reshoring is not a return to protectionism but a distinct form of geoeconomic statecraft. The findings explain cross-national variation, clarify when governments bear the costs of supply chain reconfiguration, and anticipate where reshoring will expand—and where it will stall.

Structural shifts in the global economy are reshaping the foundations of international currency power. This paper explores how the green transition, geopolitical realignment, and sustained US protectionism could interact to transform the global currency hierarchy, with a particular focus on the US dollar and the Chinese renminbi. We highlight two key drivers of currency usage: the liquidity and availability of a currency for cross-border transactions, and the strategic economic and political alignment between currency issuers and their partners. Taking into account developments in green value chains, evolving alliances, and trade policies, the paper outlines how China’s growing role in critical minerals, infrastructure finance, and alternative financial systems can enhance the internationalization of the renminbi. Concurrently, US protectionism and withdrawal from multilateralism may open up space for regional currency diversification. These trends point to an increasingly fragmented and multipolar international monetary system, where currency power will play a central role in shaping the future global order.

Open Access

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 Appendix

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 Appendix Dataverse

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

Report

Review

Report

Major changes in international currency hierarchies have historically coincided with shifts in strategically important commodity systems. As the global economy moves from fossil fuels toward critical minerals and green manufacturing, this paper asks whether the foundations of monetary power may be changing again. I argue that currencies gain international influence when states occupy central positions in strategically important production networks and build the financial infrastructure that makes their currencies easier to use in cross-border trade. A dynamic model shows how these forces can reinforce one another over time. Cross-national evidence is consistent with this argument. Countries exporting critical minerals to China are substantially more likely to adopt renminbi settlement infrastructure than countries exporting other goods, reflecting China’s chokehold on critical-mineral processing and downstream manufacturing. This relationship persists after accounting for geopolitical alignment and despite China’s extensive capital controls. Historical evidence from the transition from coal to oil shows that changes in strategically important production systems have reshaped currency hierarchies before. Simulations indicate that structural change alone substantially increases renminbi use but leaves the existing monetary hierarchy largely intact. Overtaking the euro and mounting a sustained challenge to the dollar additionally require the financial liberalization Beijing has so far declined.

The 2008 financial crisis fueled populist gains across Europe, but not the same populists everywhere. UKIP, Fidesz, PiS, and the Sweden Democrats rose outside the Eurozone; Syriza, Podemos, and the Movimento 5 Stelle rose within it. Why did a common shock push voters toward different ends of the populist spectrum on either side of the same institutional boundary? I argue that the adjustment instruments a monetary regime makes available shape where voters assign blame. Outside the Eurozone, depreciation absorbs part of the shock and the hardship that remains is read through globalization and immigration—the populist right’s terrain. Inside it, fiscal constraint and conditionality direct discontent toward Brussels and Frankfurt, which the populist left mobilizes. Monetary union does not dampen backlash; it redirects it. Because the two responses move in opposite directions, they cancel in aggregate populist measures, which helps explain why the institutional effect has gone unnoticed. Regional, individual, and party-level evidence support the pattern, and the post-2020 NextGenerationEU reform appears to have weakened it.

China has become the world’s largest trading nation, yet no country has anchored its exchange rate to the renminbi. We use this puzzle to address a longstanding debate over whether globalization erodes monetary autonomy. Post-Bretton Woods theories predicted that increasing capital mobility would force governments’ monetary policies to converge, but influential empirical work found little evidence of such. Using cross-national data on monetary policy tools and economic interdependence from 2000 to 2025, we find that convergence was largely a feature of the long era of global disinflation and faded once that era ended after the COVID-19 pandemic. Bilateral economic dependence explains little of this pattern except among economies with relatively closed capital accounts. China’s rise thus reveals an important limit on monetary power: economic size alone is insufficient to make a currency a monetary anchor. Monetary influence depends on the extent to which other economies become institutionally and financially tied to a currency. China’s expanding trade has increased the renminbi’s international use, but not those ties.

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. 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.

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.

Paper Niehaus Center summary

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.

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.

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.