EconPapers    
Economics at your fingertips  
 

Inventories, Lumpy Trade, and Large Devaluations

George Alessandria (), Joseph Kaboski and Virgiliu Midrigan ()

No 13790, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, we document these facts. We then show that a parsimoniously parameterized model economy with importers facing an (S, s)-type inventory management problem successfully accounts for these features of the data. Moreover, the model can account for import and import price dynamics in the aftermath of large devaluations. In particular, desired inventory adjustment in response to a sudden, large increase in the relative price of imported goods creates a short-term trade implosion, an immediate, temporary drop in the value and number of distinct varieties imported, as well as a slow increase in the retail price of imported goods. Our study of 6 current account reversals following large devaluation episodes in the last decade provide strong support for the model's predictions.

JEL-codes: E31 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-mac
Date: 2008-02
Note: IFM ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed

Published as George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "Inventories, Lumpy Trade, and Large Devaluations," American Economic Review, American Economic Association, vol. 100(5), pages 2304-39, December.

Downloads: (external link)
http://www.nber.org/papers/w13790.pdf (application/pdf)

Related works:
Journal Article: Inventories, Lumpy Trade, and Large Devaluations (2010) Downloads
Working Paper: Inventories, lumpy trade, and large devaluations (2009) Downloads
Working Paper: Inventories, lumpy trade, and large devaluations (2008) Downloads
Working Paper: Inventories, lumpy trade, and large devaluations (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:13790

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w13790

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-06-15
Handle: RePEc:nbr:nberwo:13790