Microeconomic uncertainty, international trade, and aggregate fluctuations
George Alessandria (),
Horag Choi (),
Joseph Kaboski and
Virgiliu Midrigan ()
Journal of Monetary Economics, 2015, vol. 69, issue C, 20-38
The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and effects of fluctuations in the dispersion of producer-level sales and production over the business cycle. On the theoretical side, we study the effect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous fluctuations in producer-level dispersion by reallocating production internationally, while second-moment shocks lead to increases in trade relative to GDP in recessions. Empirically, using detailed product-level data in the motor vehicle industry and industry-level data of U.S. manufacturers, we find evidence that international reallocation is indeed important for understanding cross-industry variation in cyclical patterns of measured dispersion.
Keywords: Sunk cost; Establishment heterogeneity; Exporting; Uncertainty (search for similar items in EconPapers)
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Working Paper: Microeconomic uncertainty, international trade, and aggregate fluctuations (2014)
Working Paper: Microeconomic Uncertainty, International Trade, and Aggregate Fluctuations (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:69:y:2015:i:c:p:20-38
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