Working Paper
Growth-led exports: is variety the spice of trade?
Abstract: Fast-growing countries tend to experience rapid export growth with little secular change in their terms of trade. This contradicts the standard Armington trade model, which predicts that fast-growing countries can experience rapid export growth only to the extent that they accept declining terms of trade. This paper generalizes the monopolistic competition trade model of Helpman and Krugman (1985), providing a basis for growth-led exports without declining terms of trade. The key mechanism behind this result is that fast-growing countries are able to develop new varieties of products that can be exported without pushing down the prices of existing products. There is strong support for the new model in long-run export growth of many countries in the post-war era.
Keywords: International trade; Product differentiation;
Access Documents
File(s): File format is text/html http://www.federalreserve.gov/pubs/ifdp/2004/822/default.htm
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/ifdp/2004/822/ifdp822.pdf
Authors
Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: International Finance Discussion Papers
Publication Date: 2004
Number: 822