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Temporary Trade

  • Balazs Murakozy

    ()

    (Institute of Economics - Hungarian Academy of Sciences)

  • Gabor Bekes

    ()

    (Institute of Economics - Hungarian Academy of Sciences)

Most trade theories assume bilateral trade relationships are forged on the basis of some comparative advantages, scale considerations, market structure or some productivity advantage of firms. Since these factors change slowly, bilateral trade relationships should be stable. However, we argue that over half of the non-zero bilateral trade relationships are of temporary nature: they last for a short period only or appear and disappear in an erratic fashion. With a very detailed country-product transaction level dataset on Hungarian exports, evidence is provided for the importance of temporary trade relationships at the bilateral level. A large share of bilateral trade flows are driven by just a few firms, and results indicate that temporary trade is important for all kinds of firms and products. In terms of empirical applications, we show that gravity equations suggest important differences between the determinants of permanent and temporary trade; and the extensive and intensive margins of trade can also be very sensitive to changes in temporary trade.

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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0909.

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Length: 48 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:has:discpr:0909
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