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Trade Costs and Some Puzzles in International Macroeconomics

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Author Info
Luke Willard (Reserve Bank of Australia)
Abstract

Obstfeld and Rogoff (2001) argue that trade costs provide at least part of the explanation for a number of puzzles in international macroeconomics. Using data on imports to the United States from developed economies, this paper investigates whether trade costs are associated with correlations associated with three of these puzzles: the Feldstein-Horioka saving-investment puzzle; the purchasing power parity real exchange rate persistence puzzle; and the international consumption correlation puzzle. In general there is some evidence in support of Obstfeld and Rogoff’s argument, though the parameters are often imprecisely estimated.

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File URL: http://www.rba.gov.au/rdp/RDP2007-10.pdf
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Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2007-10.

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Date of creation: Oct 2007
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Handle: RePEc:rba:rbardp:rdp2007-10

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Related research
Keywords: consumption smoothing; Feldstein-Horioka puzzle; purchasing power puzzle; trade;

Find related papers by JEL classification:
F00 - International Economics - - General - - - General
F3 - International Economics - - International Finance
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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This page was last updated on 2009-12-2.

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