Exchange Rate Regimes and the Extensive Margin of Trade

Bergin, Paul R.; Lin, Ching‐Yi

doi:10.3386/w14126

Cited by 18 publications

(17 citation statements)

References 26 publications

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“…See Bergin and Lin (2009) for a discussion of this point. Figure 1 plots the regression coefficients arising from the time-varying fixed effects estimation.…”

Section: Empirical Motivationmentioning

confidence: 99%

The Dynamic Effects of Currency Union on Trade

Bergin¹,

Lin²

2010

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A currency union's ability to increase international trade is one of the most debated questions in international macroeconomics. This paper studies the dynamics of these trade effects. First, an empirical study of the European Monetary Union finds that the extensive margin of trade (entry of new firms or goods) responds several years ahead of overall trade volume. This implies that the intensive margin (previously traded goods) falls in the run-up to EMU. The paper's theoretical contribution is to study the announcement of a future monetary union as a news shock to trade costs in the context of a dynamic stochastic general equilibrium trade model. Early entry of new firms in anticipation is explainable as a rational forward-looking response under certain conditions, where essential elements include sunk costs of exporting and heterogeneity among firms of a type known before entry. The findings help identify which types of trading frictions are reduced by a currency union. The important role of expectations also indicates that continued gains from EMU depend upon long-term credibility of the union.

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“…See Bergin and Lin (2009) for a discussion of this point. Figure 1 plots the regression coefficients arising from the time-varying fixed effects estimation.…”

Section: Empirical Motivationmentioning

confidence: 99%

The Dynamic Effects of Currency Union on Trade

Bergin¹,

Lin²

2010

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“…On the theoretical front, as discussed by Bergin andLin (2009, 2012), currency unions may well boost the extensive margin of bilateral trade flows, both in absolute and relative terms. Currency unification induces a reduction in transaction costs -and thereby in trade barriers -between its members.…”

Section: Introductionmentioning

confidence: 99%

Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows

2014

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“…technology with elasticity of substitution ρ > 1. 10 These intermediate 8 There is also another strand of the empirical literature that has documented a reduced form relationship between export market entry and subsequent firm productivity growth (often labeled as learning by exporting). See Greenaway and Kneller (2007) and Lopez (2005) for recent surveys.…”

Section: Model Economymentioning

confidence: 99%

“…We first use the Bellman equation (7) and free-entry condition (10) We now examine the impact of these equilibrium changes in firm profitability on the level of innovation. To do so, we solve for the innovation decisions q(z) in (7) as a function of variable profits Π D and the other parameters of the model.…”

Section: E Endogenous Innovationmentioning

confidence: 99%

Trade Liberalization and Firm Dynamics

Burstein

Melitz

2013

Advances in Economics and Econometrics

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In this paper, we analyze the transition dynamics associated with an economy's response to trade liberalization. We start by reviewing the recent literature that incorporates firm dynamics into models of international trade. We then build upon that literature to characterize the role of firm dynamics, export-market selection, firm-level innovation, sunk export costs, and firms' expectations regarding the time path of liberalization in generating those transition dynamics following trade liberalization. These modeling ingredients generate substantial aggregate transition dynamics as they shift and shape the endogenous distribution of firms over time. Our results show how the responses of trade volumes, innovation, and aggregate output can vary greatly over time depending on those modeling ingredients. This has important consequences for many issues in international economics that rely on predictions for the effects of globalization over time on those key aggregate outcomes. * We thank Javier Cravino for superb research assistance, and Daron Acemoglu and Steve Redding for many helpful comments and suggestions.

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Exchange Rate Regimes and the Extensive Margin of Trade

Cited by 18 publications

References 26 publications

The Dynamic Effects of Currency Union on Trade

The Dynamic Effects of Currency Union on Trade

Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows

Trade Liberalization and Firm Dynamics

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