Microeconomic uncertainty, international trade, and aggregate fluctuations

George Alessandria, Horag Choi, Joseph P. Kaboski, Virgiliu Midrigan

    Research output: Contribution to journalArticle

    Abstract

    The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and effects of fluctuations in the dispersion of producer-level sales and production over the business cycle. On the theoretical side, we study the effect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous fluctuations in producer-level dispersion by reallocating production internationally, while second-moment shocks lead to increases in trade relative to GDP in recessions. Empirically, using detailed product-level data in the motor vehicle industry and industry-level data of U.S. manufacturers, we find evidence that international reallocation is indeed important for understanding cross-industry variation in cyclical patterns of measured dispersion.

    Original languageEnglish (US)
    Pages (from-to)20-38
    Number of pages19
    JournalJournal of Monetary Economics
    Volume69
    DOIs
    StatePublished - Jan 1 2015

    Fingerprint

    Microeconomics
    Aggregate fluctuations
    Uncertainty
    International trade
    Industry
    Business cycles
    Motor vehicles
    Participation
    Fluctuations
    Recession
    Endogenous fluctuations
    DSGE models
    Causation
    Productivity
    Reallocation

    Keywords

    • Establishment heterogeneity
    • Exporting
    • Sunk cost
    • Uncertainty

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

    Cite this

    Microeconomic uncertainty, international trade, and aggregate fluctuations. / Alessandria, George; Choi, Horag; Kaboski, Joseph P.; Midrigan, Virgiliu.

    In: Journal of Monetary Economics, Vol. 69, 01.01.2015, p. 20-38.

    Research output: Contribution to journalArticle

    Alessandria, George ; Choi, Horag ; Kaboski, Joseph P. ; Midrigan, Virgiliu. / Microeconomic uncertainty, international trade, and aggregate fluctuations. In: Journal of Monetary Economics. 2015 ; Vol. 69. pp. 20-38.
    @article{236d72273238414aa5dcd63f5c033df3,
    title = "Microeconomic uncertainty, international trade, and aggregate fluctuations",
    abstract = "The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and effects of fluctuations in the dispersion of producer-level sales and production over the business cycle. On the theoretical side, we study the effect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous fluctuations in producer-level dispersion by reallocating production internationally, while second-moment shocks lead to increases in trade relative to GDP in recessions. Empirically, using detailed product-level data in the motor vehicle industry and industry-level data of U.S. manufacturers, we find evidence that international reallocation is indeed important for understanding cross-industry variation in cyclical patterns of measured dispersion.",
    keywords = "Establishment heterogeneity, Exporting, Sunk cost, Uncertainty",
    author = "George Alessandria and Horag Choi and Kaboski, {Joseph P.} and Virgiliu Midrigan",
    year = "2015",
    month = "1",
    day = "1",
    doi = "10.1016/j.jmoneco.2014.11.007",
    language = "English (US)",
    volume = "69",
    pages = "20--38",
    journal = "Journal of Monetary Economics",
    issn = "0304-3932",
    publisher = "Elsevier",

    }

    TY - JOUR

    T1 - Microeconomic uncertainty, international trade, and aggregate fluctuations

    AU - Alessandria, George

    AU - Choi, Horag

    AU - Kaboski, Joseph P.

    AU - Midrigan, Virgiliu

    PY - 2015/1/1

    Y1 - 2015/1/1

    N2 - The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and effects of fluctuations in the dispersion of producer-level sales and production over the business cycle. On the theoretical side, we study the effect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous fluctuations in producer-level dispersion by reallocating production internationally, while second-moment shocks lead to increases in trade relative to GDP in recessions. Empirically, using detailed product-level data in the motor vehicle industry and industry-level data of U.S. manufacturers, we find evidence that international reallocation is indeed important for understanding cross-industry variation in cyclical patterns of measured dispersion.

    AB - The extent and direction of causation between micro volatility and business cycles are debated. We examine, empirically and theoretically, the source and effects of fluctuations in the dispersion of producer-level sales and production over the business cycle. On the theoretical side, we study the effect of exogenous first- and second-moment shocks to producer-level productivity in a two-country DSGE model with heterogeneous producers and an endogenous dynamic export participation decision. First-moment shocks cause endogenous fluctuations in producer-level dispersion by reallocating production internationally, while second-moment shocks lead to increases in trade relative to GDP in recessions. Empirically, using detailed product-level data in the motor vehicle industry and industry-level data of U.S. manufacturers, we find evidence that international reallocation is indeed important for understanding cross-industry variation in cyclical patterns of measured dispersion.

    KW - Establishment heterogeneity

    KW - Exporting

    KW - Sunk cost

    KW - Uncertainty

    UR - http://www.scopus.com/inward/record.url?scp=84925080605&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=84925080605&partnerID=8YFLogxK

    U2 - 10.1016/j.jmoneco.2014.11.007

    DO - 10.1016/j.jmoneco.2014.11.007

    M3 - Article

    VL - 69

    SP - 20

    EP - 38

    JO - Journal of Monetary Economics

    JF - Journal of Monetary Economics

    SN - 0304-3932

    ER -