Bilateral Trade Imbalances (Online event)

06  May 2021    4:00 pm CEST

Alejandro Cuñat, University of Vienna

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This is an online event via Zoom. Please register for the dial-in link, reminders and e-mail updates. The dial-in link will be sent to you shortly before the event.


This presentation is based on a paper co-authored with Robert Zymek.

Alejandro Cunat

Bilateral trade imbalances are determined by aggregate trade imbalances, production and expenditure patterns, and trade barriers. We calibrate a dynamic many-sector trade model to match the recent sectoral trade and production shares of 40 economies and the rest of the world. Through a variance decomposition and counterfactuals, the model allows us to assess the relative importance of these determinants for the observed variation in bilateral imbalances. Large pairwise asymmetries in residual trade “wedges” are needed for the model to match the data. These account for roughly 60% of the variation, with most of the rest due to differences in production and expenditure patterns. Aggregate trade imbalances play a minor role. A counterfactual trade policy which eliminates trade-wedge asymmetries would have sizeable effects on bilateral trade patterns and welfare. However, it would leave aggregate trade balances virtually unchanged.

The presentation, when available, will be posted after the event.

Alejandro Cuñat studied Economics in Valencia and Harvard, where he got his PhD in June 2000. Since September 2009 he is Professor of Economics at the University of Vienna. Prior to this he held appointments at Università Bocconi, LSE and the University of Essex. His work focuses on International Economics. He often looks into the implications of international economic relations on macroeconomic outcomes (income per capita, economic growth, productivity growth, business cycles), but also does research on the determinants of trade patterns and the behavior of firms in the open economy. He has published, among others, in the Economic Journal, the Journal of Development Economics, the Journal of the European Economic Association, the Journal of International Economics, and the Review of Economic Dynamics.

Keywords: trade imbalances, trade wedges, gravity

JEL classification: F15, F20, F32, F40, F62

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