Essays on International Trade, Financial Intermediation, and Networks

Abstract

This dissertation studies various aspects of how the macroeconomy is shaped by international trade and financial intermediation. The first chapter analyzes trade in dual-use goods, items with both civilian and military applications. Xinyue Lin and I document that, historically, regulation and trade flows of critical goods have reacted to changes in the national security environment. We propose a theoretical definition of dual-use goods by integrating a military contest into a trade model. Then we take our model to the data and deliver a ranking of dual-use goods, as well as macroeconomic magnitudes behind the consumption-security trade-off. The second chapter, a joint work with Leonardo D’Amico, studies the dynamics of interest rate differentials for bank lending across the U.S. states between 1953 and 1983. When the national rate is high, savers invest in competitive financial instruments, and rates equalize across space. When the national rate is low, savers keep their money in checking accounts that provide liquidity services, so demand for loans and supply of savings clear locally, resulting in a geographic dispersion of lending rates. Our model explores the spatial implications of this pattern for economic activity and considers branching counterfactuals. The third, and final, chapter explores patterns of international currency invoicing and its implications for prices and quantities. When firms lock contracts on prices and quantities, their balance sheets become exposed to exchange rate movements. To reduce balance sheet volatility, firms match currencies of their exports to currencies of their imports. In networks, such invoicing behavior propagates beyond direct trade links, which leads to the amplification of more central currencies.