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Trade Adjustment and Productivity in Large Crises

  • Brent Neiman

    (University of Chicago)

  • Gita Gopinath

    (Harvard University)

Episodes of large crises such as the Mexican crisis in 1994-1995, the East Asian crisis in 1997-1998, and the Argentine crisis in 2001-2002 are associated with large adjustments in trade flows. The dollar value of imports in Argentina, for instance, dropped by 80 percent between 2000 and 2002. A second feature of these episodes is the large decline in real GDP and total factor productivity (TFP). In this paper we do two things: First, we empirically characterize the mechanics of trade adjustment at the firm and product level during the Argentine crisis. Our analysis makes use of detailed firm-level customs data covering the universe of import transactions for Argentina during 1996-2008, a period that includes a dramatic nominal exchange rate depreciation and trade balance reversal. Second, we use a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and round about production to evaluate the channels through which the collapse in imports effects value added and TFP in manufacturing.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 975.

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Date of creation: 2011
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Handle: RePEc:red:sed011:975
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