Learning and the Value of Trade Relationships

53 Pages Posted: 15 Apr 2015 Last revised: 2 Mar 2016

See all articles by Ryan Monarch

Ryan Monarch

Federal Reserve Board

Tim Schmidt-Eisenlohr

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: February 29, 2016

Abstract

How valuable are long-term supplier relationships? To address this question, this paper explores relationships between U.S. importers and their suppliers abroad. We establish several facts: almost half of U.S. imports involve relationships three years or older, relationship survival and traded quantity increase as a relationship ages, and long-term relationships were more resilient in the 2008-09 financial crisis. We present a model of importer learning and calibrate it to detailed panel data on U.S. importer relationships. Model estimates imply large differences in the value of relationships across countries. Counterfactuals show that relationship-level responses to shocks are central to aggregate trade dynamics.

Keywords: International Trade, Firm Relationships, Learning, Institutions

JEL Classification: F11, F14, L14, D22

Suggested Citation

Monarch, Ryan and Schmidt-Eisenlohr, Tim, Learning and the Value of Trade Relationships (February 29, 2016). Available at SSRN: https://ssrn.com/abstract=2594035 or http://dx.doi.org/10.2139/ssrn.2594035

Ryan Monarch

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Tim Schmidt-Eisenlohr (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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