International Trade and Intertemporal Substitution
Fernando Leibovici () and
Working Papers from York University, Department of Economics
This paper studies the dynamics of international trade flows at business cycle frequencies. We show that introducing dynamic considerations into an otherwise standard model of trade can account for several puzzling features of trade flows at business cycle frequencies. Our insight is that because international trade is time-intensive, variation in the rate at which agents are willing to substitute across time affects how trade volumes respond to changes in output and prices. We formalize this idea and calibrate our model to match key features of U.S. data. We find that, in contrast to standard staticmodels of international trade, ourmodel is quantitatively consistent with salient features of U.S. cyclical import fluctuations. We also find that our model accounts for two-thirds of the peak-to-trough decline in imports during the 2008-2009 recession.
Pages: 41 pages
New Economics Papers: this item is included in nep-dge, nep-int, nep-mac and nep-opm
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Journal Article: International trade and intertemporal substitution (2019)
Working Paper: International Trade and Intertemporal Substitution (2018)
Working Paper: International Trade and Intertemporal Substitution (2014)
Working Paper: Cyclical Fluctuations in International Trade Volumes (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:yca:wpaper:2014_5
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