[position in research by date]
[position in research by subject]
"Trade Models and Macroeconomics,"
December 2019, in progress.
Appendix, pdf file,
This paper discusses some macro links that are missing from trade models.
A multicountry macroeconometric model is used to analyze the effects on
the United States of increased import competition from China, an experiment
that is common in the recent trade literature.
In the macro story a fall in Chinese export prices is stimulative.
Domestic prices fall, which increases real wage rates and real wealth,
which increases household expenditures. In addition, the Fed may lower the
interest rate because of the lower prices, which is stimulative.
Trade models do not have these channels, and they likely overestimate the
negative effects or underestimate the positive effects on total output
and employment from increased Chinese import competition. They lack
some important aggregate demand channels, which are not likely