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Trade Wedges, Inventories, and International Business Cycles / George Alessandria, Joseph Kaboski, Virgiliu Midrigan.
- Format:
- Book
- Author/Creator:
- Alessandria, George.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18191.
- NBER working paper series no. w18191
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- The large, persistent fluctuations in international trade that can not be explained in standard models by changes in expenditures and relative prices are often attributed to trade wedges. We show that these trade wedges can reflect the decisions of importers to change their inventory holdings. We find that a two-country model of international business cycles with an inventory management decision can generate trade flows and wedges consistent with the data. Moreover, matching trade flows alters the international transmission of business cycles. Specifically, real net exports become countercyclical and consumption is less correlated across countries than in standard models. We also show that ignoring inventories as a source of trade wedges substantially overstates the role of trade wedges in business cycle fluctuations.
- Notes:
- Print version record
- June 2012.
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