TCP files

Files Last update
TCP_Supplementary_Appendix.pdf 30/01/2019
TCP_Paper.pdf 30/01/2019
Abstract

What is the relationship between international trade and business cycle synchronization? Using data from 40 countries, we find that GDP comovement is significantly associated with trade in intermediate inputs but not with trade in final goods. Motivated by this new fact, we build a model of international trade that is able to replicate the empirical trade-comovement slope, offering the first quantitative solution for the Trade Comovement Puzzle. The model relies on (i) global value chains, (ii) price distortions due to monopolistic competition and (iii) fluctuations in the mass of firms serving each country. The combination of these ingredients creates a link between domestic measured productivity and foreign shocks through trade linkages, generating a disconnect between technology and measured productivity. Finally, we provide empirical evidence for the importance of these elements in generating a link between foreign shocks and domestic GDP.

TCP estimates
Sensitive analysis: Trade GDP-Comovement Slope
Coeff - trade in inputs Coeff - trade in final goods GDP Filter Countries | Obs. Period TW CP
Whole Sample 0.053** -0.030 HP 40 | 2,900 1970-2009 Yes Yes
20 years TW 0.074** -0.054 HP 40 | 1,450 1970-2009 Yes Yes
Excluding EU CP 0.056** 0.005 HP 40 | 2,280 1970-2009 Yes Yes
Excluding USSR 0.064** -0.006 HP 34 | 2,244 1970-2009 Yes Yes
Alternative TW 0.081*** 0.014 HP 34 | 2,244 1970-1999 Yes Yes
4Digits SITC 0.058** -0.045* HP 36 | 2,520 1970-2009 Yes Yes
ISIC classification 0.059** -0.045* HP 36 | 2,520 1970-2009 Yes Yes
1Digit Agg. sectors 0.088 -0.044 HP 38 | 1,291 1970-2009 Yes Yes
level(trade) 33,96* -34.92 HP 40 | 2,900 1970-2009 Yes Yes
log(mean(trade)) 0.044* -0.027 HP 40 | 2,900 1970-2009 Yes Yes
max{T/GDP_1,T/GDP_2} 0.052** -0.032 HP 40 | 2,900 1970-2009 Yes Yes
STAN data 0.209** -0.107 HP 20 | 760 1995-2014 Yes Yes