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The effects of autocatalytic trade cycles on economic growth

Author

Listed:
  • Jurriën J. Bakker

    () (Eindhoven University of Technology)

  • Oscar Afonso

    () (University of Porto, Faculty of Economics, CEFUP)

  • Sandra T. Silva

    () (University of Porto, Faculty of Economics, CEFUP)

Abstract

In the first part of this paper the effects of trade cycles on economic growth are discussed to test the hypothesis of autocatalytic trade cycles, which indicates that more innovation is produced in countries that are a part of these cycles. Using United Nations data, a trade network is constructed and from this network, a set of variables that represent the participation of countries in trade cycles are constructed. A clear relation between these variables and economic growth is found. However, this relationship changes for different trade cycle sizes, categories of goods and time scales. Trade cycles also have a positive effect for the trade flows involved, although this effect differ significantly depending on the size of the trade cycle. The second part of the paper shows that the effects of trade cycles can be translated into policy recommendations. These conclusions strenghten existing literature but also add new insights to innovation policy and the pursuit of economic prosperity.

Suggested Citation

  • Jurriën J. Bakker & Oscar Afonso & Sandra T. Silva, 2012. "The effects of autocatalytic trade cycles on economic growth," FEP Working Papers 451, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:451
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/wp451.pdf
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    References listed on IDEAS

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    1. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, pages 117-153.
    2. Auray, Stéphane & Eyquem, Aurélien & Poutineau, Jean-Christophe, 2012. "The effect of a common currency on the volatility of the extensive margin of trade," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1156-1179.
    3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    4. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
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    Cited by:

    1. Ricardo Biscaia & Paula Sarmento, 2012. "Cost inefficiency and Optimal Market Structure in Spatial Cournot Discrimination," FEP Working Papers 462, Universidade do Porto, Faculdade de Economia do Porto.
    2. Pedro Cosme Costa Vieira, 2012. "A low cost supercritical Nuclear + Coal 3.0 Gwe power plant," FEP Working Papers 461, Universidade do Porto, Faculdade de Economia do Porto.

    More about this item

    Keywords

    innovation; autocatalytic trade cycles; international trade; policy;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F1 - International Economics - - Trade
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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