International Trade and Macroeconomic Dynamics with Heterogeneous Firms
| Title: | International Trade and Macroeconomic Dynamics with Heterogeneous Firms |
| Author: |
Ghironi, Fabio; Melitz, Marc
Note: Order does not necessarily reflect citation order of authors. |
| Citation: | Ghironi, Fabio, and Marc J. Melitz. 2005. International trade and macroeconomic dynamics with heterogeneous firms. Quarterly Journal of Economics 120, no. 3: 865-915. |
| Full Text & Related Files: |
melitz_internationaltrade.pdf (1.098Mb; PDF) 
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| Abstract: | 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. |
| Published Version: | http://dx.doi.org/10.1162/003355305774268246 |
| Other Sources: | http://www.nber.org/papers/w10540 |
| Terms of Use: | This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:3228377 |
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