Dynamic Adjustment to Trade Shocks / Junyuan Chen, Carlos Góes, Marc-Andreas Muendler, Fabian Trottner.

Format:

Book

Author/Creator:

Chen, Junyuan.

Contributor:

Góes, Carlos André.

Muendler, Marc-Andreas.

Trottner, Fabian.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w35013.

NBER working paper series no. w35013

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2026.

Summary:

Global trade flows and supply chains adjust gradually. Empirical estimates of the trade elasticity for the short run are a fraction of those for the long run and suggest that trade is subject to substantive dynamic frictions. We develop a tractable framework that provides microfoundations for trade adjustment and rationalizes estimation of a time-varying trade elasticity. The model features forward-looking firms facing sticky sourcing choices and nests a version of the Eaton-Kortum model as a limiting long- run case. We calibrate the model and quantify the impacts of two events: the 2004 EU Eastern enlargement (an anticipated change) and the 2018 US-China trade war (an arguably unanticipated change). Our findings suggest that sourcing frictions and anticipation effects alter the time pattern of specialization, can result in short-term welfare losses but long-term gains, and can drive marked trade adjustments before anticipated shocks occur.

Notes:

March 2026.

Print version record