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Entry, trade costs, and international business cycles

Author

Listed:
  • Roberto N. Fattal Jaef

    (The World Bank - The World Bank)

  • Jose Ignacio Lopez

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

Are firm entry and fixed exporting costs relevant for understanding the international transmission of business cycles? We revisit this question using a model that includes entry, selection to exporting activity, physical capital accumulation and endogenous labor supply. We determine that once the stochastic process for exogenous productivity is calibrated to consider the endogenous dynamics in TFP created by the number of firms and the time series volatility of entry is calibrated to the data, our model yields minimal departures from the Backus et al. (1992) benchmark. The richer model shares all of the successes of the previous model in terms of the volatilities of aggregate quantities, as well as its failures, in terms of replicating patterns of international co-movement and the volatility of international relative prices.

Suggested Citation

  • Roberto N. Fattal Jaef & Jose Ignacio Lopez, 2014. "Entry, trade costs, and international business cycles," Post-Print hal-01099623, HAL.
  • Handle: RePEc:hal:journl:hal-01099623
    DOI: 10.1016/j.jinteco.2014.08.008
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-01099623
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Zlate, Andrei, 2016. "Offshore production and business cycle dynamics with heterogeneous firms," Journal of International Economics, Elsevier, vol. 100(C), pages 34-49.
    2. Sauré, Philip, 2017. "Time-intensive R&D and unbalanced trade," European Economic Review, Elsevier, vol. 91(C), pages 229-244.
    3. Liao, Wei & Santacreu, Ana Maria, 2015. "The trade comovement puzzle and the margins of international trade," Journal of International Economics, Elsevier, vol. 96(2), pages 266-288.
    4. Masashige Hamano, 2013. "On business cycles of variety and quality," CREA Discussion Paper Series 13-21, Center for Research in Economic Analysis, University of Luxembourg.
    5. Mine Senses & Andrei Zlate & Christopher Kurz, 2017. "All Shook Up: International Trade and Firm-level Volatility," 2017 Meeting Papers 851, Society for Economic Dynamics.
    6. Francois de Soyres, 2016. "Trade and Interdependence in International Networks," 2016 Meeting Papers 157, Society for Economic Dynamics.
    7. repec:wly:jmoncb:v:50:y:2018:i:6:p:1343-1363 is not listed on IDEAS
    8. Felipe Benguria & Felipe Saffie & Sergio Urzúa, 2018. "The Transmission of Commodity Price Super-Cycles," NBER Working Papers 24560, National Bureau of Economic Research, Inc.
    9. Millard, Stephen & Nicolae, Anamaria & Nower, Michael, 2019. "International trade, non-trading firms and their impact on labour productivity," Bank of England working papers 787, Bank of England.
    10. Kohn, David & Leibovici, Fernando & Szkup, Michal, 2017. "Financial Frictions, Trade, and Misallocation," Research Department working papers 1106, CAF Development Bank Of Latinamerica.

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