Essays in international economics

Chapter 2 investigates international reserve accumulation (self-insurance) and bailouts from International Financial Institutions (external insurance), which are key instruments that countries use to manage sovereign debt distress. Policymakers have long argued that stringent IMF conditionality has encouraged greater self-insurance over recent decades, despite a lack of direct evidence. To investigate this relationship, I develop a quantitative sovereign default model featuring long-term debt, reserve accumulation, and a conditional bailout facility. The model yields a novel result: the relationship between conditionality stringency and long-run reserve accumulation is non-monotonic. Moderate conditionality increases reserves by shifting reliance from external to self-insurance. Very strict conditionality, on the other hand, raises default risk and makes debt-financed reserve accumulation more costly, lowering reserves. Welfare analysis indicates that stricter bailout programs lead to lower overall welfare, although they deliver long-run gains by inducing safer portfolios---highlighting the importance of transition costs. Chapter 3 quantifies the relative footprint of trade and agricultural productivity on deforestation across Brazilian municipalities between 2000 and 2017. Using remote-sensing data, we identify distinct effects of these two phenomena on land use. Greater exposure to new genetically engineered soy seeds is associated with faster deforestation through cropland expansion. We find no significant association between local exposure to Chinese demand and deforestation, but exposure to trade with China mitigates the deforestation impacts from the new soy technology. Our findings suggest that, when considered together, productivity gains altering municipalities' comparative advantage played a more significant role in driving deforestation across Brazil than Chinese demand alone. Chapter 4 tests the central nonlinear prediction of Chapter 2. Using local projections, I estimate the dynamic response of reserves to conditionality stringency, measured by the requested fiscal adjustment and the number of conditions attached to IMF programs. To address potential endogeneity, I use mission chiefs' conditionality preferences as an instrument. The results support a hump-shaped pattern: moderate increases in conditionality are associated with higher long-run reserve accumulation, but this effect weakens and eventually reverses when programs become very stringent.