Ananth Ramanarayanan

Assistant Professor, Economics Department, University of Western Ontario



1. Working papers

Imported Inputs, Irreversibility, and International Trade Dynamics

New version: February, 2016

In aggregate data, trade volumes adjust slowly in response to relative price changes, an observation at odds with static theories of international trade. This paper develops a model of trade in intermediate inputs in which heterogeneous producers face a plant-level irreversibility in adjusting their importing status. Relative price movements induce immediate changes in aggregate imports through adjustment within importing producers, and through the reallocation of resources between non-importing and importing producers. Additionally, trade volumes adjust slowly through gradual changes in the fraction of importers in the economy. When calibrated to match cross-section data on plant-level heterogeneity in imports, the model predicts magnitudes of these margins that are broadly in line with those in plant-level data. Plant-level irreversibilities are important for generating aggregate and plant-level dynamics of trade flows in line with the data.

Imported Inputs and the Gains from Trade

September, 2014

Empirical studies find that trade liberalization raises productivity at plants that use imported inputs. This paper develops a model to illustrate and quantify how these productivity gains shape the aggregate welfare gains from trade. Countries differ in their costs of producing intermediates. Plants in each country choose a fraction of inputs to optimally source from the lowest cost supplier country, with the rest purchased domestically. Sourcing more inputs requires higher up-front fixed costs, but reduces variable input costs. Consistent with a broad set of studies with plant-level data, not all plants import; import shares vary among those that do; importers are larger than nonimporters; and importing more leads to higher productivity. Import decisions amplify productivity differences across plants, with higher within-plant productivity gains at larger plants. When calibrated to Chilean data, this concentration of productivity gains raises the aggregate welfare gain from trade by sixty percent.

2. Published papers

Default and the Maturity Structure in Sovereign Bonds

(with Cristina Arellano)

Journal of Political Economy, 120(2), April 2012

This paper studies the maturity composition and the term structure of interest rate spreads of government debt in emerging markets. In the data, when interest rate spreads rise, debt maturity shortens and the spread on short-term bonds rises more than the spread on long-term bonds. We build a dynamic model of international borrowing with endogenous default and multiple debt maturities. Long-term debt provides a hedge against future fluctuations in spreads, while short-term debt is more effective at providing incentives to repay. The trade-off between these hedging and incentive benefits is quantitatively important for understanding the maturity structure in emerging markets.

Vertical Specialization and International Business Cycle Synchronization

(with Costas Arkolakis)

Scandinavian Journal of Economics, 111(4), December 2009

We explore the impact of vertical specialization - trade in goods across multiple stages of production - on the relationship between trade and business cycle synchronization across countries. We develop an international business cycle model in which the degree of vertical specialization varies with trade barriers. With perfect competition, we show analytically that fluctuations in measured total factor productivity are not linked across countries through trade. In numerical simulations, we find little dependence of business cycle synchronization on trade intensity. An extension of the model to allow for imperfect competition has the potential to resolve these shortcomings.

Note: the version linked above is the last working paper version, with an additional unpublished appendix.