International trade and macroeconomic dynamics with heterogeneous firms
By: Fabio Ghironi, Marc J. Melitz.
Contributors: Melitz, Marc J.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10540; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10540.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: International trade.; Business cycles.; Industrial productivity.
Description: "We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics.  Productivity differs across individual, monopolistically competitive firms in each country.  Firms face a sunk entry cost in the domestic market and both fixed and per-unit export costs.  Only relatively more productive firms export.  Exogenous shocks to aggregate productivity and entry or trade costs induce firms to enter and exit both their domestic and export markets, thus altering the composition of consumption baskets across countries over time.  In a world of flexible prices, our model generates endogenously persistent deviations from PPP that would not exist absent our microeconomic structure with heterogeneous firms.  It provides an endogenous, microfounded explanation for a Harrod-Balassa-Samuelson effect in response to aggregate productivity differentials and deregulation.  Finally, the model successfully matches several moments of U.S.  and international business cycles"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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