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American Economic Review Vol. 101 No. 3 2011

US Trade and Inventory Dynamics

George Alessandria1; Joseph P. Kaboski2; Virgiliu Midrigan3

1 Research Department, Federal Reserve Bank of Philadelphia, Ten Independence Mall, Philadelphia, PA 19106. · 2 Department of Economics, University of Notre Dame, 434 Flanner Hall, Notre Dame, IN 46556. · 3 Economics Department, New York University, 9 W. 4th Street, 6FL, New York, NY 10012.

Abstract

We examine the source of the large fall and rebound in US trade in the recent recession. While trade fell and rebounded more than expenditures or production of traded goods, we find that relative to the magnitude of the downturn, these trade fluctuations were in line with those in previous business cycle fluctuations. We argue that the high volatility of trade is attributed to more severe inventory management considerations of firms involved in international trade. We present empirical evidence for autos as well as at the aggregate level that the adjustment of inventory holdings help explain these fluctuations in trade.

DOI
10.1257/aer.101.3.303
Volume
101
Issue
3
Pages
303-307
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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