Large-scale Multinational Shocks and International Trade: a Non-zero-sum Game

Rossella Bardazzi and Leonardo Ghezzi

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: International trade contributed to improving living standards but has also become one of the major channels for spreading country-specific shocks on a global scale. Analyzing the economic growth path of a modern nation, it’s important to consider the potential external demand not as an exogenous variable but as an endogenous component in order to investigate its role in the event of a global shock. The aim of this paper is to enrich the literature on empirical trade models introducing an input-output approach that (i) considering cumulative and non-linear dynamics, (ii) taking into account the shock effect on relative prices and on IO linkages, and (iii) treating explicitly the time dimension in the simulation, allows to overcome some shortcomings of previous contributions. Our model shows that a change in the price level on international markets due to a large shock affects the global demand producing an asymmetric non-zero-sum game.

Keywords: international trade; input-output modeling; new quantitative trade models; industry linkages (search for similar items in EconPapers)
JEL-codes: C67 D57 F14 F17 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2021
New Economics Papers: this item is included in nep-int
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Journal Article: Large-scale multinational shocks and international trade: a non-zero-sum game (2022)
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