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Working Paper
International Trade and Intertemporal Substitution
This paper quantitatively investigates the extent to which variation in the intertemporal marginal rate of substitution can help account for puzzling features of cyclical fluctuations of international trade volumes. 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 use a standard small open economy model with time-intensive international trade, calibrated to match key features of U.S. data and disciplining the variation in the ...
Working Paper
Capital Accumulation and Dynamic Gains from Trade
We compute welfare gains from trade in a dynamic, multi-country Ricardian model where international trade affects capital accumulation. We calibrate the model for 93 countries and examine transition paths between steady-states after a permanent, uniform trade liberalization across countries. Our model allows for both the relative price of investment and the investment rate to depend on the world distribution of trade barriers. Accounting for transitional dynamics, welfare gains are about 60 percent of those measured by comparing only the steady-states, and three times larger than those with ...