Microeconomic uncertainty, international trade, and aggregate fluctuations
George Alessandria (),
Horag Choi (),
Joseph Kaboski and
Virgiliu Midrigan ()
No 14-30, Working Papers from Federal Reserve Bank of Philadelphia
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 expect 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)
JEL-codes: E31 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
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Journal Article: Microeconomic uncertainty, international trade, and aggregate fluctuations (2015)
Working Paper: Microeconomic Uncertainty, International Trade, and Aggregate Fluctuations (2014)
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