Three essays in international economics

This doctoral dissertation consists of three empirical essays studying cross-country linkages.;The first chapter re-examines the relationship between trade and business cycle synchronization using new value-added trade data for 63 advanced and emerging economies during 1995--2013. In a panel framework, we identify a significantly positive impact of bilateral (value-added) trade intensity on business cycle synchronization---controlling for global common shocks, country-pair heterogeneity and other covariates---that is absent when gross trade data are used. There is also some evidence that the impact of value-added trade on synchronization increases with the degree of (value-added) intra-industry trade. We provide a theoretical rationale for the role of value-added trade for synchronization using a simple international business cycle model that features cross-country input linkages in production.;In the second chapter we study what causes the fall in trade during a sovereign default. Specifically, we examine the role of trade finance scarcity in reducing trade during sovereign default. This is the first study, of its kind, to account for all possible trade finance channels when estimating the above effect. Using a sample of 88 developed and developing countries during 1980-2012, we find that during a default both exports and imports decline more than GDP. The fall in export-GDP ratio results from reduced availability of trade finance. For import-GDP ratio, only part is associated with trade finance. This finding challenges the validity of the well-postulated 'direct trade sanction' cost of sovereign default.;In the third essay, we estimate a dynamic factor model using Bayesian methods to identify a China factor and a global factor using monthly macroeconomic data from China and rest of the world. We, then, assess implications of the China factor on global commodity prices and macroeconomy of a commodity exporting nation in a reduced form Bayesian VAR. A negative China shock causes fall in global commodity prices leading to output loss and stock market fall in these countries. The effect of a China shock is smaller than that of a US shock. For commodity prices and stock markets, China shock has more persistent effect than US shock.