Trade and Uncertainty
Copyright policy )Trade and Uncertainty
We offer a new explanation as to why international trade is so volatile in response to economic shocks. Our approach combines the idea of uncertainty shocks with international trade. Firms order inputs from home and foreign suppliers. In response to an uncertainty shock firms disproportionately cut orders of foreign inputs due to higher fixed costs. In the aggregate, this leads to a bigger contraction in international trade flows than in domestic activity, a magnification effect. We confront the model with newly compiled US import and industrial production data. Our results help to explain the Great Trade Collapse of 2008–2009.
- University of California, Davis United States
- National Bureau of Economic Research United States
- University of Warwick United Kingdom
- Centre for Economic Policy Research United Kingdom
Konjunktur, HF, intermediates, Imports; Intermediates; Inventory; Real options; Trade collapse; Uncertainty shock, Uncertainty shock, trade collapse, inventory, real options, imports, intermediates, Import, trade collapse, F10, imports, Internationale Wirtschaft, uncertainty shock, uncertainty shock, trade collapse, inventory, real options, imports, intermediates, E30, USA, real options, ddc:330, Lagerzyklus, Uncertainty shock; trade collapse; inventory; real options; imports; intermediates, Vorleistungen, inventory, Schock, F40, jel: jel:F40, jel: jel:E3, jel: jel:F10, jel: jel:E30, jel: jel:F1
Konjunktur, HF, intermediates, Imports; Intermediates; Inventory; Real options; Trade collapse; Uncertainty shock, Uncertainty shock, trade collapse, inventory, real options, imports, intermediates, Import, trade collapse, F10, imports, Internationale Wirtschaft, uncertainty shock, uncertainty shock, trade collapse, inventory, real options, imports, intermediates, E30, USA, real options, ddc:330, Lagerzyklus, Uncertainty shock; trade collapse; inventory; real options; imports; intermediates, Vorleistungen, inventory, Schock, F40, jel: jel:F40, jel: jel:E3, jel: jel:F10, jel: jel:E30, jel: jel:F1
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