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Trade Flows and Exchange Rates: Importers, Exporters and Products

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  • Michael B. Devereux
  • Wei Dong
  • Ben Tomlin

Abstract

Using highly-disaggregated transaction-level trade data, we document the importance of new firm-level trade partner relationships and the addition of new products to existing relationships in driving long-run import flows. Moreover, we find that these margins are sensitive to movements in the exchange rate. We rationalize these findings in a model of international trade with endogenous matching between heterogenous importers and exporters. Simulations of the model highlight a new channel through which exchange rate movements can affect trade—through the short-run formation of new trade relationships and the range of products traded within relationships, which can impact long-run flows.

Suggested Citation

  • Michael B. Devereux & Wei Dong & Ben Tomlin, 2019. "Trade Flows and Exchange Rates: Importers, Exporters and Products," NBER Working Papers 26314, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26314
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    1. Jonathan Eaton & Samuel Kortum & Francis Kramarz, 2011. "An Anatomy of International Trade: Evidence From French Firms," Econometrica, Econometric Society, vol. 79(5), pages 1453-1498, September.
    2. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
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    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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