Microeconomic Uncertainty, International Trade, and Aggregate Fluctuations

George Alessandria, Horag Choi, Joseph Kaboski and Virgiliu Midrigan

No 20616, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 effect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogenous 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.

JEL-codes: E31 F12 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
Note: AP EFG IFM ITI
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Published as Alessandria, George & Choi, Horag & Kaboski, Joseph P. & Midrigan, Virgiliu, 2015. "Microeconomic uncertainty, international trade, and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 69(C), pages 20-38.

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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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