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US Trade and Inventory Dynamics

Author

Listed:
  • George Alessandria
  • Joseph P. Kaboski
  • Virgiliu Midrigan

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.

Suggested Citation

  • George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2011. "US Trade and Inventory Dynamics," American Economic Review, American Economic Association, vol. 101(3), pages 303-307, May.
    • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:303-07
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    References listed on IDEAS

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    1. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "Inventories, Lumpy Trade, and Large Devaluations," American Economic Review, American Economic Association, vol. 100(5), pages 2304-2339, December.
    2. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2016. "Trade and the Global Recession," American Economic Review, American Economic Association, vol. 106(11), pages 3401-3438, November.
    3. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "The Great Trade Collapse of 2008-09: An Inventory Adjustment?," NBER Working Papers 16059, National Bureau of Economic Research, Inc.
    4. Andrei A. Levchenko & Logan Lewis & Linda L. Tesar, 2009. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," Working Papers 592, Research Seminar in International Economics, University of Michigan.
    5. Mary Amiti & David E. Weinstein, 2011. "Exports and Financial Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 1841-1877.
    6. Boileau, Martin, 1999. "Trade in capital goods and the volatility of net exports and the terms of trade," Journal of International Economics, Elsevier, vol. 48(2), pages 347-365, August.
    7. Chor, Davin & Manova, Kalina, 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 117-133.
    8. Engel, Charles & Wang, Jian, 2011. "International trade in durable goods: Understanding volatility, cyclicality, and elasticities," Journal of International Economics, Elsevier, vol. 83(1), pages 37-52, January.
    9. Andrei A Levchenko & Logan T Lewis & Linda L Tesar, 2010. "The Collapse of International Trade during the 2008–09 Crisis: In Search of the Smoking Gun," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 58(2), pages 214-253, December.
    10. Virgiliu Midrigan & Joe Kaboski & George Alessandria, 2012. "Trade, Inventories, and International Business Cycles," 2012 Meeting Papers 762, Society for Economic Dynamics.
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