International Trade and Intertemporal Substitution

Fernando Leibovici and Michael Waugh

Working Papers from York University, Department of Economics

Abstract: This paper studies the dynamics of international trade flows at business cycle frequencies. We show that introducing dynamic considerations into an otherwise standard model of trade can account for several puzzling features of trade flows at business cycle frequencies. Our insight is that because international trade is time-intensive, variation in the rate at which agents are willing to substitute across time affects how trade volumes respond to changes in output and prices. We formalize this idea and calibrate our model to match key features of U.S. data. We find that, in contrast to standard staticmodels of international trade, ourmodel is quantitatively consistent with salient features of U.S. cyclical import fluctuations. We also find that our model accounts for two-thirds of the peak-to-trough decline in imports during the 2008-2009 recession.

Pages: 41 pages
Date: 2014-08-11
New Economics Papers: this item is included in nep-dge, nep-int, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://dept.econ.yorku.ca/research/workingPapers/working_papers/2014_5.pdf
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to dept.econ.yorku.ca:80 (No such host is known. )

Related works:
Journal Article: International trade and intertemporal substitution (2019)
Working Paper: International Trade and Intertemporal Substitution (2016)
Working Paper: International Trade and Intertemporal Substitution (2014)
Working Paper: Cyclical Fluctuations in International Trade Volumes (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:yca:wpaper:2014_5

Access Statistics for this paper

More papers in Working Papers from York University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Support ( this e-mail address is bad, please contact ).