US Trade and Inventory Dynamics

Alessandria, George; Kaboski, Joseph P.; Midrigan, Virgiliu

doi:10.1257/aer.101.3.303

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American Economic Review: Vol. 101 No. 3 (May 2011)

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US Trade and Inventory Dynamics

Article Citation

Alessandria, George, Joseph P. Kaboski, and Virgiliu Midrigan. 2011. "US Trade and Inventory Dynamics." American Economic Review, 101(3): 303-07.

DOI: 10.1257/aer.101.3.303

Abstract

We examine the source of the large fall and rebound in US trade in the recent recession. While trade fell and rebounded more than expenditures or production of traded goods, we find that relative to the magnitude of the downturn, these trade fluctuations were in line with those in previous business cycle fluctuations. We argue that the high volatility of trade is attributed to more severe inventory management considerations of firms involved in international trade. We present empirical evidence for autos as well as at the aggregate level that the adjustment of inventory holdings help explain these fluctuations in trade.

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Authors

Alessandria, George (Federal Reserve Bank of Philadelphia)
Kaboski, Joseph P. (U Notre Dame)
Midrigan, Virgiliu (NYU)

JEL Classifications

E22: Capital; Investment; Capacity
E32: Business Fluctuations; Cycles
F14: Country and Industry Studies of Trade