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Entry, trade costs, and international business cycles

Abstract : Are firm entry and fixed exporting costs relevant for understanding the international transmission of business cycles? We revisit this question using a model that includes entry, selection to exporting activity, physical capital accumulation and endogenous labor supply. We determine that once the stochastic process for exogenous productivity is calibrated to consider the endogenous dynamics in TFP created by the number of firms and the time series volatility of entry is calibrated to the data, our model yields minimal departures from the Backus et al. (1992) benchmark. The richer model shares all of the successes of the previous model in terms of the volatilities of aggregate quantities, as well as its failures, in terms of replicating patterns of international co-movement and the volatility of international relative prices.
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Submitted on : Sunday, January 4, 2015 - 10:04:21 PM
Last modification on : Thursday, January 11, 2018 - 6:19:32 AM

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Roberto N. Fattal Jaef, Jose Ignacio Lopez. Entry, trade costs, and international business cycles. Journal of International Economics, Elsevier, 2014, 94 (2), pp.224-238. ⟨10.1016/j.jinteco.2014.08.008⟩. ⟨hal-01099623⟩

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