George Alessandria - Academia.edu (original) (raw)

Papers by George Alessandria

We examine the source of the large fall and rebound in US trade in the recent recession. While tr... more 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.

Social Science Research Network, 2001

We consider lending and investment under asymmetric information in an emerging economy. We allow ... more We consider lending and investment under asymmetric information in an emerging economy. We allow for different forms of Þnancial contracts to arise endogenously in the credit market. We examine the impact of opening the capital account on both aggregate output level and the structure of lending arrangements. Financial intermediaries mitigate the moral hazard problem in investment choice through costly monitoring all projects and liquidating risky, negative NPV projects. Depending on the quality and cost of the monitoring technology, opening the capital account may strengthen or weaken the role of Þnancial intermediaries, leading to an improvement or worsening of the aggregate composition of investment projects. Our results suggest situations where limiting the capital inßow or outßow may be necessary to avoid an aggregate risk shift and the collapse of the Þnancial intermediation sector.

Social Science Research Network, 2008

... George Alessandria Federal Reserve Bank of Philadelphia Joseph Kaboski Ohio State University ... more ... George Alessandria Federal Reserve Bank of Philadelphia Joseph Kaboski Ohio State University Virgiliu Midrigan New York University January 2008 Page 2. Inventories, Lumpy Trade, and Large Devaluations∗ George Alessandria Joseph Kaboski Virgiliu Midrigan ...

International Economic Review, Nov 1, 2004

This article examines the size and persistence of international deviations from the law of one pr... more This article examines the size and persistence of international deviations from the law of one price in an industry with search frictions. Cost differences lead foreign and domestic firms to price differently within countries. When local firms are more common in each country, there are large and persistent price differences across countries. Large and persistent changes in international relative costs lead to large and persistent changes in international relative prices. Dynamic considerations imply that the amount of a cost shock firms pass through to prices is U-shaped in the market share of firms receiving the shock.

The Business Review, 2009

Working paper, 2011

We examine the source of the large fall and rebound in U.S. trade in the recent recession. While ... more We examine the source of the large fall and rebound in U.S. 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 helps explain these fluctuations in trade. (JEL E31, F12)

We study empirically and theoretically the dynamics of the US trade balance. We propose a theoret... more We study empirically and theoretically the dynamics of the US trade balance. We propose a theoretical decomposition of ‡uctuations in the trade balance into terms related to trade integration (global and unilateral) and terms related to asymmetries in the business cycle. We …nd three main results. First, the relatively large trade de…cits as a share of GDP of the US in the 2000s compared to the 1980s mostly re ‡ect a rise in trade share of GDP. Second, between 40 and 80 percent of the ‡uctuations in ratio of the trade balance to trade re ‡ects an uneven pace of trade liberalization. Third, while asymmetries in the business cycle account for 20 to 60 percent of ‡uctuations in the trade balance over trade, over two-thirds of the business cycle induced movements in net trade ‡ows are a lagged response to changes in the terms of trade and real exchange rate. That is, the short-run Armington elasticity is about 0.15 while the long-run is closer to 1.7 with only 7 percent of the gap closed per quarter. Constant elasticity models of trade explain less than 10 percent of the movements in the trade balance.

Journal of Monetary Economics, Aug 1, 2020

We study the role of migration in a sovereign debt crisis. Empirically, we document a large worke... more We study the role of migration in a sovereign debt crisis. Empirically, we document a large worker outflow accompanies a rise in sovereign debt spreads. We develop a model of sovereign default with an endogenous migration choice to understand how migration interacts with the default risk and propagates a debt crisis. In the model, the outflow of workers erodes the tax base and increases the government's debt burden by increasing debt-per-capita, further increasing default risk. As a result, the government decreases investment, which affects the consumption of the workers. Lower consumption, in turn, increases the probability of emigration. Compared with a model without endogenous migration, our model generates a higher default risk, lower investment, and a deeper and more prolonged recession. The impact of the migration channel is even more substantial when the average migrant has higher levels of human capital relative to locals.

Social Science Research Network, 2005

Not all …rms export every period. Firms enter and exit foreign markets. Previous research has sug... more Not all …rms export every period. Firms enter and exit foreign markets. Previous research has suggested that these export participation decisions have signi…cant aggregate implications. In particular, it has been argued that these export decisions are important for the comovements of net exports and the real exchange rate. In this paper, we evaluate these predictions in a general equilibrium environment. Speci…cally, assuming that …rms face an up-front, sunk cost of entering foreign markets and a smaller period-by-period continuation cost, we derive the discrete entry and exit decisions yielding exporter dynamics in an otherwise standard equilibrium open economy business cycle model. We show that the export decisions of …rms in the model are in ‡uenced by the business cycle in a manner consistent with evidence presented for U.S. exporters. However, in contrast to previous partial equilibrium analyses, model results reveal that the aggregate e¤ects of these export decisions are negligible. JEL classi…cations: E31, F12.

Social Science Research Network, 2023

Journal of International Economics, May 1, 2008

In a closed economy general equilibrium model, Hopenhayn and Rogerson (1993) find large welfare g... more In a closed economy general equilibrium model, Hopenhayn and Rogerson (1993) find large welfare gains to removing firing restrictions. We explore the extent to which international trade alters this result. When economies trade, labor market policies in one country spill over to other countries through a change in the terms of trade. This reduces the incentive to reform labor markets. In a policy game over firing taxes between countries, we find that countries optimally choose positive levels of firing taxes. A coordinated elimination of firing taxes yields considerable benefits. This insight provides some explanation for recent efforts toward labor market reform in the European Union.

Working paper, May 1, 2012

The large, persistent fluctuations in international trade that can not be explained in standard m... more The large, persistent fluctuations in international trade that can not be explained in standard models by changes in expenditures and relative prices are often attributed to trade wedges. We show that these trade wedges can reflect the decisions of importers to change their inventory holdings. We find that a two-country model of international business cycles with an inventory management decision can generate trade flows and wedges consistent with the data. Moreover, matching trade flows alters the international transmission of business cycles. Specifically, real net exports become countercyclical and consumption is less correlated across countries than in standard models. We also show that ignoring inventories as a source of trade wedges substantially overstates the role of trade wedges in business cycle fluctuations.

Federal Reserve Bank of San Francisco, Working Paper Series, 2008

Fixed transaction costs and delivery lags are important costs of international trade. These costs... more Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, we document these facts. We then show that a parsimoniously parameterized model economy with importers facing an (S, s)-type inventory management problem successfully accounts for these features of the data. Moreover, the model can account for import and import price dynamics in the aftermath of large devaluations. In particular, desired inventory adjustment in response to a sudden, large increase in the relative price of imported goods creates a short-term trade implosion, an immediate, temporary drop in the value and number of distinct varieties imported, as well as a slow increase in the retail price of imported goods. Our study of 6 current account reversals following large devaluation episodes in the last decade provide strong support for the model's predictions.

Working paper, May 1, 2005

as well as numerous participants at seminars and conferences for helpful comments. All remaining ... more as well as numerous participants at seminars and conferences for helpful comments. All remaining errors are my own.

Annual Review of Economics, Aug 5, 2021

The views expressed herein are those of the authors and do not necessarily reflect the views of t... more The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Journal of International Economics, Sep 1, 2005

We consider lending and investment under asymmetric information in a small, developing economy. W... more We consider lending and investment under asymmetric information in a small, developing economy. We allow different forms of financial contracts to arise endogenously. Financial intermediaries mitigate a moral hazard problem in investment choice through costly monitoring. We then examine the impact of opening the capital account on both welfare and the structure of lending contracts. Liberalizing the capital account may improve or worsen the efficiency of financial intermediaries, leading to an improvement or worsening of the aggregate composition of investment projects. We show that efficient financial intermediaries in the closed economy are neither necessary nor sufficient for a capital account liberalization to improve welfare.

Journal of International Economics, Nov 1, 2014

We study a variation of the Melitz (2003) model, a monopolistically competitive model with hetero... more We study a variation of the Melitz (2003) model, a monopolistically competitive model with heterogeneity in productivity across establishments and fixed costs of exporting. We calibrate the model to match the employment size distribution of US manufacturing establishments. Export participation in the calibrated model is then compared to the data on US manufacturing exporters. With fixed costs of starting to export about 3.9 times as large as costs of continuing as an exporter, the model can match both the size distribution of exporters and transition into and out of exporting. The calibrated model is then used to estimate the effect of reducing tariffs on welfare, trade, and export participation. We find sizeable gains to moving to free trade. Contrary to the view that the gains to lowering tariffs are larger in models with export decisions, we find that steady state consumption increases by less in our benchmark model of exporting than in a similar model without fixed costs. However, we also find that comparisons of steady state consumption understate the welfare gains to trade reform in models with fixed costs and overstate the welfare gains in models without fixed costs. With fixed costs, tariffs lead to an overaccumulation of product varieties which can be used more effectively along the transition to the new steady state. Thus, following trade liberalizations economic activity overshoots its steady state, with the peak in output coming 10 years after the trade reform. Finally, we explore the impact of the key modelling assumptions in the theoretical literature for quantitative results.

RePEc: Research Papers in Economics, 2011

We study the role of inventories for the volatility of international trade and the propagation of... more We study the role of inventories for the volatility of international trade and the propagation of business cycles. We build a model of international trade in which intermediaries have a precautionary motive to hold inventories. With either productivity or demand shocks, we …nd inventories increase the volatility of international trade whenever traded goods have relatively high inventory holdings. Moreover, net exports are now more strongly countercyclical and appear in line with the data. We also …nd that inventories generate greater comovement of business cycles, particularly from aggregate demand shocks. .

Social Science Research Network, 2012

We study empirically and theoretically the growth of U.S. manufacturing exports from 1987 to 2007... more We study empirically and theoretically the growth of U.S. manufacturing exports from 1987 to 2007. We identify the change in iceberg costs with plant-level data on the intensity of exporting by exporters. Given this change in iceberg costs, we …nd that a GE model with heterogeneous establishments and a sunk cost of starting to export is consistent with both aggregate U.S. export growth and the changes in the number and size of U.S. exporters. The model also captures the nonlinear dynamics of U.S. export growth. A model without a sunk export cost generates substantially less trade growth and misses out on the timing of export growth. Contrary to the theory, employment was largely reallocated from very large establishments, those with more than 2,500 employees, toward very small manufacturing establishments, those with fewer than 100 employees. Allowing for faster productivity growth in manufacturing, changes in capital intensity, and some changes in the underlying shock process makes the theory consistent with the changes in the employment size distribution. We also …nd that the contribution of trade to the contraction in U.S. manufacturing employment is small.

RePEc: Research Papers in Economics, 2015