Ananth Ramanarayanan

Assistant Professor, Economics Department, University of Western Ontario



1. Working papers

October, 2018

Firms face considerable informational barriers to engaging in international trade. Immigrants can play a key role in overcoming these barriers by acting as intermediaries between firms in their home and host countries, thus facilitating trade. Previous studies have shown that this trade-creation effect of immigrants is significant at the aggregate level: e.g. Portuguese immigrants to Canada raises Canada’s exports to Portugal. In this paper, we examine the trade-creation effect of immigrants at the firm level: how much Portuguese immigrants employed by Canadian firms increase those firms’ exports to Portugal. We use a unique administrative matched employer-employee dataset containing Canadian manufacturing firms’ export transactions and employees’ immigration data to estimate how much immigrant employees reduces a firm’s costs of exporting to their home countries.

International Risk Sharing with Endogenously Segmented Asset Markets

New version: September, 2018

Asset price data imply a large degree of international risk sharing, while aggregate consumption data do not. We show that a model with trade in goods and endogenously segmented asset markets can account for this puzzling discrepancy. Active households - who pay a fixed cost to transfer money into or out of assets - share risk within and across countries, and their marginal utility growth prices assets, so asset prices imply high risk sharing. Inactive households consume their current income and do not share risk, so aggregate consumption (which averages across all households) reflects lower risk sharing. The model also provides a resolution to the Backus-Smith-Kollmann puzzle.

Imported Inputs and the Gains from Trade

New Version: April, 2018

This paper characterizes how plant-level heterogeneity in imported input use affects the aggregate welfare gains from trade. Heterogeneous plants choose a fraction of inputs to source from the lowest cost source country, with the rest purchased domestically. Sourcing more inputs requires higher up-front fixed costs, but reduces variable input costs, so import shares are increasing in plant size. Plant-level and aggregate import demand are nonhomothetic, which lowers the equilibrium elasticity of trade flows with respect to trade costs relative to the partial trade elasticity. The welfare gain from trade is higher than in models in which the welfare gain is governed by the partial trade elasticity. When calibrated to Chilean plant-level data, this difference is large.

2. Published papers

Imported Inputs, Irreversibility, and International Trade Dynamics

Journal of International Economics, 104, January 2017

In aggregate data, international trade volumes adjust slowly in response to relative price changes, an observation at odds with static models. This paper develops a model of trade in intermediate inputs in which heterogeneous producers face irreversibilities in adjusting their importing status. Changes in aggregate imports are accounted for by adjustment within importing plants, through reallocation between non-importers and importers, and through changes in the importing decisions of new and existing plants. When calibrated to Chilean plant-level data, the model shows that irreversibilities are important for generating aggregate and plant-level dynamics of trade áows in line with the data. In response to a permanent trade reform, increased importing at existing plants crowds out entry, raising consumption above its long-run level, and leading to welfare gains larger than a static model would imply.

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.