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International Trade and Macroeconomic Dynamics with Heterogeneous Firms Author info | Abstract | Publisher info | Download info | Related research | Statistics Fabio Ghironi
Marc J. Melitz
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We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face a sunk entry cost in the domestic market and both fixed and per-unit export costs. Only relatively more productive firms export. Exogenous shocks to aggregate productivity and entry or trade costs induce firms to enter and exit both their domestic and export markets, thus altering the composition of consumption baskets across countries over time. In a world of flexible prices, our model generates endogenously persistent deviations from PPP that would not exist absent our microeconomic structure with heterogeneous firms. It provides an endogenous, microfounded explanation for a Harrods-Balassa-Samuelson effect in response to aggregate productivity differentials and deregulation. Finally, the model successfully matches several moments of U. S. and international business cycles. © 2005 MIT Press
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Article provided by MIT Press in its journal The Quarterly Journal of Economics .
Volume (Year): 120 (2005)
Issue (Month): 3 (August)
Pages: 865-915
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Handle: RePEc:tpr:qjecon:v:120:y:2005:i:3:p:865-915Contact details of provider: Web page: http://mitpress.mit.edu/journals/
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Paper Fabio Ghironi & Marc Melitz, 2004.
"International Trade and Macroeconomic Dynamics with Heterogeneous Firms ,"
2004 Meeting Papers
451, Society for Economic Dynamics.
[Downloadable!] Ghironi, Fabio & Melitz, Marc J, 2004.
"International Trade and Macroeconomic Dynamics with Heteroegenous Firms ,"
CEPR Discussion Papers
4595, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Fabio Ghironi & Marc J. Melitz, 2004.
"International Trade and Macroeconomic Dynamics with Heterogeneous Firms ,"
NBER Working Papers
10540, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Fabio Ghironi & Marc J. Melitz, 2004.
"International Trade and Macroeconomic Dynamics with Heterogeneous Firms ,"
Boston College Working Papers in Economics
599, Boston College Department of Economics.
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