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Learning and the Value of Trade Relationships

Ryan Monarch and Tim Schmidt-Eisenlohr ()

No 1218, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper quantifies the value of importer-exporter relationships. We show that almost 80 percent of U.S. imports take place in pre-existing relationships, with sizable heterogeneity across countries, and show that traded quantities and survival increase as relationships age. We develop a two-country general equilibrium trade model with learning that is consistent with these facts. A model-based measure of relationship value explains survival during the 2008-09 crisis. Knowledge accumulated within long-term relationships is quantitatively important: wiping out all memory from previous interactions, on average, reduces consumption by 5 percent on impact and by 48 percent over the transition back to steady state.

Keywords: International Trade; Firm Relationships; Learning; Trade Dynamics (search for similar items in EconPapers)
JEL-codes: F11 F14 L14 D22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2017-11-29
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Working Paper: Learning and the Value of Relationships in International Trade (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1218

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DOI: 10.17016/IFDP.2017.1218

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