Search and Deliberation in International Exchange: Learning from Multinational Trade About Lags, Distance Effects, and Home Bias

Subramanian Rangan and Robert Lawrence

No 7012, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper compares the responses of intra- and extra-firm trade to exchange rate changes. It does so both to inform the debate on whether these responses are qualitatively different and to improve understanding of the microfoundations of features of trade behavior such as long adjustment lags, the large impact of distance, and the presence of significant home bias. We argue that the informational problems posed by search (acts identifying potential exchange partners) and deliberation (acts assessing their reliability and trustworthiness) play a key role in explaining these features and suggest that multinationals should have advantages in overcoming these problems. Indeed we find that the responses of multinationals to exchange rate changes are both larger and more rapid.

JEL-codes: F14 F15 (search for similar items in EconPapers)
Date: 1999-03
New Economics Papers: this item is included in nep-ifn
Note: ITI
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Citations: View citations in EconPapers (25)

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