Transmission of Shocks Across Countries
Saturday, Jan. 6, 2018 10:15 AM - 12:15 PM
- Chair: Christoph Boehm, Princeton University
Input Linkages and International Monetary Spillovers
AbstractThis paper studies how cross-border input linkages alter the transmission of monetary shocks across countries. We extend a workhorse open economy New Keynesian model to distinguish final goods from intermediate inputs in production and incorporate input-output linkages across countries. In the model, input linkages are both a source of real rigidities in price setting and a counterweight to the standard beggar-thy-neighbor effects of monetary expansions. Calibrating the model to match multi-country input-output tables, we quantify how the how input linkages modify the transmission of monetary shocks across countries. The model and results shed new light on the role of global supply chains in understanding the logic of currency wars, the gains from monetary cooperation, the cost-benefit trade-off for fixed exchange rates, and inflation spillovers across countries.
International Linkages and the Changing Nature of International Business Cycles
AbstractWe quantify the effects of changes in international input-output linkages on the nature of business cycles. We build a multi-sector multi-country international business cycle model that matches the input-output structure within and across countries. We find that, in our 23 countries sample with manufacturing and non-manufacturing sectors, changes in the input-output linkages within and across borders between 1970 and 2007 causes a 21% drop in output volatility in a median country and a small increase in cross-country output correlations. Our decomposition attributes about 11% of the drop in output volatility to changes in international input-output linkages.
Volatility in the Small and in the Large: The Lack of Diversification in International Trade
AbstractWe study how different sources of fluctuations interact with the microstructure of trade networks to shape the volatility of exports at the firm-level and in the aggregate. Four shocks affect transactions – a macroeconomic shock and three individual shocks hitting the exporters, their foreign partners, and their matches. We structurally estimate these shocks using data on the transactions connecting French exporters to their individual European buyers. Individual shocks explain half of aggregate fluctuations and the entirety of individual fluctuations. The volatility of sales across firms and countries are well-explained by the cross-sectional heterogeneity in the diversification of their trade networks.
- F4 - Macroeconomic Aspects of International Trade and Finance
- E3 - Prices, Business Fluctuations, and Cycles