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Interest Rates and World Trade: An 'Austrian' Perspective

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  • Pol Antràs

Abstract

This paper develops a framework to study the interplay between world trade and interest rates. The model incorporates an explicit notion of time and of production length, along the lines of the ‘Austrian’ tradition of Böhm-Bawerk (1889). Changes in the interest rate affect production lengths, labor productivity, and the financial costs of exporting. I decompose the response of the volume of world trade to changes in the interest rate into four components: (i) a labor productivity effect, (ii) a propensity to consume out of labor income effect, (iii) a temporal dimension of variable trade costs effect, and (iv) a selection into exporting effect.

Suggested Citation

  • Pol Antràs, 2023. "Interest Rates and World Trade: An 'Austrian' Perspective," NBER Working Papers 30844, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30844
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    JEL classification:

    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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