International Business Cycles: The Quantitative Role of Transportation Costs

Morten Ravn and Elisabetta Mazzenga

No 3530, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We evaluate the quantitative effects of introducing costs of transporation into an international trade model. We model these costs through the introduction of international transportation services sector. Costs of transportation have substantial long-run effects on welfare and may impact on the pattern of trade. However, business cycle effects on relative price movements and on international comovements are less pertinent since decreased trade volatility counteracts the effects of transportation cost variations. Nevertheless, it is also shown that costs of transportation combined with delivery lags go a long way towards resolving, in particular, the international comovement puzzle.

Keywords: International business cycles; Costs of transportation; Home-bias in trade; Terms of trade; Real exchange rates; International comovements; Delivery lags (search for similar items in EconPapers)
JEL-codes: E32 F31 F41 (search for similar items in EconPapers)
Date: 2002-09
New Economics Papers: this item is included in nep-dge, nep-ifn and nep-mac
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Citations: View citations in EconPapers (5)

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Journal Article: International business cycles: the quantitative role of transportation costs (2004)
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