US Trade and Inventory Dynamics
AbstractWe 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.
CitationAlessandria, 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
- E22 Capital; Investment; Capacity
- E32 Business Fluctuations; Cycles
- F14 Country and Industry Studies of Trade