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Large-scale Multinational Shocks and International Trade: a Non-zero-sum Game

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  • Rossella Bardazzi
  • Leonardo Ghezzi

Abstract

International trade contributed to improving living standards but has also become one of the major channels for spreading country-specific shocks on a global scale. Analyzing the economic growth path of a modern nation, it’s important to consider the potential external demand not as an exogenous variable but as an endogenous component in order to investigate its role in the event of a global shock. The aim of this paper is to enrich the literature on empirical trade models introducing an input-output approach that (i) considering cumulative and non-linear dynamics, (ii) taking into account the shock effect on relative prices and on IO linkages, and (iii) treating explicitly the time dimension in the simulation, allows to overcome some shortcomings of previous contributions. Our model shows that a change in the price level on international markets due to a large shock affects the global demand producing an asymmetric non-zero-sum game.

Suggested Citation

  • Rossella Bardazzi & Leonardo Ghezzi, 2021. "Large-scale Multinational Shocks and International Trade: a Non-zero-sum Game," Working Papers - Economics wp2021_09.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2021_09.rdf
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    3. Michelena Gabriel & Ernst Christoph & Pablo Bertin, 2025. "Tariffs and Labor Markets: The Employment Impact of the Recent Trade Conflict," Papers 2512.11578, arXiv.org.

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    Keywords

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    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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