Juvenal, Luciana and Santos Monteiro, Paulo orcid.org/0000-0002-2014-4824 (2024) Risky Gravity. Journal of the European Economic Association. pp. 1590-1627. ISSN 1542-4774
Abstract
We consider the canonical trade model with heterogeneous firms, love for variety and trade costs, and integrate it in the consumption CAPM model. This yields a structural gravity equation that includes an additional factor related to risk premia. Empirical evidence based on firm-level data confirms the importance of cross-sectional heterogeneity in risk and time-varying risk premia to shape bilateral trade flows. The structural gravity model augmented to account for fluctuations in risk premia offers a compelling explanation for trade collapses during abrupt economic downturns.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © The Author(s) 2023. This is an author-produced version of the published paper. Uploaded in accordance with the University’s Research Publications and Open Access policy. |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 11 Aug 2023 13:20 |
Last Modified: | 23 Jan 2025 00:33 |
Published Version: | https://doi.org/10.1093/jeea/jvad060 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1093/jeea/jvad060 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:202366 |
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