International Trade and Intertemporal Substitution
42 Pages Posted: 22 Sep 2014 Last revised: 3 Jan 2022
There are 3 versions of this paper
International Trade and Intertemporal Substitution
International Trade and Intertemporal Substitution
International Trade and Intertemporal Substitution
Date Written: September 2014
Abstract
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 static models of international trade, our model 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.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun
By Andrei A. Levchenko, Logan T. Lewis, ...
-
By Mary Amiti and David E. Weinstein
-
By Mary Amiti and David E. Weinstein
-
Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis
By Davin Chor and Kalina Manova
-
Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis
By Davin Chor and Kalina Manova
-
Trade and the Global Recession
By Jonathan Eaton, Samuel S. Kortum, ...
-
Trade and the Global Recession
By Jonathan Eaton, Samuel S. Kortum, ...
-
Firms and the Global Crisis: French Exports in the Turmoil
By Jean Charles Bricongne, Lionel Fontagne, ...
-
Firms and the Global Crisis: French Exports in the Turmoil
By Jean Charles Bricongne, Lionel Fontagne, ...