Trade adjustment and the composition of trade
By: Christopher Erceg, Luca Guerrieri, Christopher Gust
Contributors: Guerrieri, Luca; Gust, Christopher J.; Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers -- no. 859; International finance discussion papers (Online) -- no. 859.
Publisher: Federal Reserve Board
Published: 2006
Place of publication: Washington, D.C
Language: eng
Format: [electronic resource] /
Description: "A striking feature of U.S.  trade is that both imports and exports are heavily concentrated in capital goods and consumer durables.  However, most open economy general equilibrium models ignore the marked divergence between the composition of trade flows and the sectoral composition of U.S.  expenditure, and simply posit import and exports as depending on an aggregate measure of real activity (such as domestic absorption).  In this paper, we use a SDGE model (SIGMA) to show that taking account of the expenditure composition of U.S.  trade in an empirically-realistic way yields implications for the responses of trade to shocks that are markedly different from those of a "standard" framework that abstracts from such compositional differences.  Overall, our analysis suggests that investment shocks, originating from either foreign or domestic sources, may serve as an important catalyst for trade adjustment, while implying a minimal depreciation of the real exchange rate"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 6/1/2006.

Includes bibliographical references.

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