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International Business Cycles: The Quantitative Role of Transportation Costs

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  • Ravn, Morten
  • Mazzenga, Elisabetta

Abstract

We evaluate the quantitative effects of introducing costs of transporation into an international trade model. We model these costs through the introduction of international transportation services sector. Costs of transportation have substantial long-run effects on welfare and may impact on the pattern of trade. However, business cycle effects on relative price movements and on international comovements are less pertinent since decreased trade volatility counteracts the effects of transportation cost variations. Nevertheless, it is also shown that costs of transportation combined with delivery lags go a long way towards resolving, in particular, the international comovement puzzle.

Suggested Citation

  • Ravn, Morten & Mazzenga, Elisabetta, 2002. "International Business Cycles: The Quantitative Role of Transportation Costs," CEPR Discussion Papers 3530, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3530
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    More about this item

    Keywords

    International business cycles; Costs of transportation; Home-bias in trade; Terms of trade; Real exchange rates; International comovements; Delivery lags;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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