for european and north american companies. these firms must therefore take up many challenges in order to safeguard their competitive edge, both on their domestic markets and their foreign outlets. at the same time, the emerging countries are large in size and exhibit strong economic growth, too. therefore, they also offer many opportunities for firms that are able to seize them. all these developments linked to the increasing globalisation of the economy obviously raise a good many questions. these include the determinants of trade flows, strategies enabling companies to gain a foothold in external markets, or the employment consequences of importing goods from low - cost countries. these issues have been extensively discussed in both the theoretical and empirical economic literature. since the mid - nineties, a growing segment of this literature has been paying particular attention to the microeconomic determinants of international trade and foreign investment. researchers have made intensive use of firm - level databases specific to different countries that have gradually become available for them. this microeconomic approach has brought an important contribution to our understanding of the causes and consequences of the globalisation, mainly because firm - level data make it possible to point up things that do not show up in aggregate statistics. if only one example had to be given, it would of course be the fact that trade is concentrated among a few firms, which are in a better position than the others to bear the high costs associated with entering foreign markets. indeed, within each industry, firms of different sizes, with different performances, and with different behaviour in terms of innovation and international involvement, operate alongside each other. it is important to take this heterogeneity into consideration to understand the dynamics of foreign trade. this heterogeneity also has very important implications for economic policy, in the sense that it helps to identify two levers that are likely to be activated as a means of boosting firms ’ international involvement. the first consists of encouraging their expansion – and especially that of smes – so as to give them the best preparation to go international, including policies designed to foster their research and development efforts. the second lever concerns measures aimed at cutting the costs of entering foreign markets, for instance by helping firms to find potential new customers there or by removing administrative and regulatory barriers. another undeniable advantage of the microeconomic approach is that it helps bring out the scale of reallocation of production factors from the weakest - performing firms towards those whose business is more flourishing. among other things, this enables economists to gain a

for release on delivery 12 : 50 p. m. edt september 27, 2021 navigating delta headwinds on the path to a full recovery remarks by lael brainard member board of governors of the federal reserve system at “ shocks, shifts, and the emerging economic landscape ” 2021 annual meeting of the national association for business economics arlington, virginia september 27, 2021 it is a great honor to join the community of nabe fellows, and i want to express my appreciation to the board of directors of nabe. 1 given the unprecedented nature of the pandemic shock, it should be no surprise that the recovery is not proceeding in a straight line. the economy continues to make welcome progress, but the delta variant has been more disruptive than initially expected. the headwinds from delta are a reminder that the virus continues to pose downside risks to the outlook. delta highlights the importance of being attentive to economic outcomes and not getting too attached to an outlook that may get buffeted by evolving virus conditions. indeed, delta disrupted both demand and supply. many forecasters have downgraded consumer spending in the second half of the year, as delta has limited the acceleration in services spending that had been anticipated to help offset the drag on activity from fiscal support shifting from being a tailwind to a headwind. although the retail sales print for august was stronger than expected, the level of spending in august was not much changed from june. high - frequency data indicate that consumption of discretionary services, such as restaurants and travel, stalled or may have even moved lower in some categories since july. this development doesn ’ t appear to be sensitive to regional variations in vaccinations, perhaps reflecting the high transmissibility of delta. for example, the consumption of food services has declined recently even in states with relatively high vaccination rates and low case counts. 2 i am grateful to kurt lewis of the federal reserve board for his assistance in preparing this text. these views are my own and do not necessarily reflect those of the federal reserve board or the federal open market committee. reflecting these trends, consumer confidence declined in the michigan and conference board surveys in august. for more information on the university of michigan survey of consumers, see https : / / data. sca. isr. umich. edu / survey - info. php. for more information on the conference board consumer confidence survey, see https : / / conference - board. org / data / consumerconfide