International Trade in an Uncertain World / Benny Kleinman, Ernest Liu, Stephen J. Redding, David Xu.

Format:

Book

Author/Creator:

Kleinman, Benny.

Contributor:

Liu, Ernest.

Redding, Stephen J.

Xu, David.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w35416.

NBER working paper series no. w35416

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2026.

Summary:

We develop a tractable quantitative model of international trade in which agents make bilateral investments in resilience under general equilibrium uncertainty. Under both complete and incomplete financial markets, we show that these bilateral investments solve a portfolio problem of choosing trade partners. Countries' risk profiles become determinants of trade flows, income and welfare, whose first moments are affected by the second moments of productivity and trade costs. Changes in global economic uncertainty have heterogeneous effects across countries, depending on how they affect real hedging opportunities. The opening of trade can raise or reduce income volatility, but is revealed-preferred to autarky.

Notes:

July 2026.

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