International Trade and Macroeconomic Dynamics with Heterogeneous Firms
Fabio Ghironi,Marc J. Melitz +1 more
TLDR
This article developed a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics and provided an endogenous, microfounded explanation for a HarrodBalassa-Samuelson effect in response to aggregate productivity differentials and deregulation.Abstract:
We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face a sunk entry cost in the domestic market and both fixed and per-unit export costs. Only relatively more productive firms export. Exogenous shocks to aggregate productivity and entry or trade costs induce firms to enter and exit both their domestic and export markets, thus altering the composition of consumption baskets across countries over time. In a world of flexible prices, our model generates endogenously persistent deviations from PPP that would not exist absent our microeconomic structure with heterogeneous firms. It provides an endogenous, microfounded explanation for a HarrodBalassa-Samuelson effect in response to aggregate productivity differentials and deregulation. Finally, the model successfully matches several moments of U. S. and international business cycles.read more
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Pricing-to-Market, Trade Costs, and International Relative Prices
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Comparative advantage and heterogeneous firms
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Market Penetration Costs and the New Consumers Margin in International Trade
TL;DR: In this paper, the authors developed a novel theory of marketing costs within a trade model with product differentiation and heterogeneity in firm productivities, which can reconcile the observed positive relationship between entry and market size with the existence of many small exporters in each exporting market.
References
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Journal ArticleDOI
The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity
TL;DR: This paper developed a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade and showed how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market).
Journal ArticleDOI
Time to build and aggregate fluctuations
TL;DR: In this article, a general equilibrium model is developed and fitted to U.S. quarterly data for the post-war period, with the assumption that more than one time period is required for the construction of new productive capital and the non-time-separable utility function that admits greater intertemporal substitution of leisure.
Posted Content
Scale Economies, Product Differentiation, and the Pattern of Trade
TL;DR: In this article, the authors present a simple formal analysis which incorporates these elements, and show how it can be used to shed some light on some issues which cannot be handled in more conventional models.
Book
Interest and Prices: Foundations of a Theory of Monetary Policy
TL;DR: Woodford as mentioned in this paper proposes a rule-based approach to monetary policy suitable for a world of instant communications and ever more efficient financial markets, arguing that effective monetary policy requires that central banks construct a conscious and articulate account of what they are doing.
Journal ArticleDOI
The Purchasing-Power Parity Doctrine: A Reappraisal
TL;DR: The purchasing power parity (HIE) doctrine has had its ebbs and flows I over the years as mentioned in this paper and it has also had its critics, among others Taussig after World War J4 and Haberler after WWIJ,5 but it has managed to survive nevertheless.