Working Paper: NBER ID: w30844
Authors: Pol Antràs
Abstract: This paper develops a framework to study the interplay between world trade and interest rates. The model incorporates an explicit notion of time and of production length, along the lines of the ‘Austrian’ tradition of Böhm-Bawerk (1889). Changes in the interest rate affect production lengths, labor productivity, and the financial costs of exporting. I decompose the response of the volume of world trade to changes in the interest rate into four components: (i) a labor productivity effect, (ii) a propensity to consume out of labor income effect, (iii) a temporal dimension of variable trade costs effect, and (iv) a selection into exporting effect.
Keywords: interest rates; world trade; Austrian economics; labor productivity; exporting
JEL Codes: F1; F10; F12; F65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Interest Rates (E43) | Production Lengths (Y20) |
| Production Lengths (Y20) | Labor Productivity (O49) |
| Interest Rates (E43) | Labor Productivity (O49) |
| Interest Rates (E43) | Financial Costs of Exporting (F10) |
| Interest Rates (E43) | Propensity to Consume out of Labor Income (E21) |
| Propensity to Consume out of Labor Income (E21) | World Trade Volumes (F10) |