Value Added and Productivity Linkages Across Countries
What is the relationship between international trade and business cycle synchronization? Using data from 40 OECD countries and major emerging markets, I find that trade in intermediate inputs plays a significant role in synchronizing GDP fluctuations across countries while trade in final goods is found insignificant. Motivated by this new fact, I build a model of international trade in intermediates that is able to replicate more than 85% of the empirical trade-comovement slope, making a significant step toward solving the "trade comovement puzzle". The model relies on two key assumptions: (i) price distortions due to monopolistic competition and (ii) fluctuations in the mass of firms serving each country. The combination of those ingredients creates a link between domestic productivity and foreign shocks through trade linkages. Finally, I provide evidence for the importance of those elements in the link between foreign shocks and domestic GDP and test other predictions of the model.
Media Coverage : France Culture (interview)
Propagation of Trade Disruption (with Guillaume Sublet)
We propose a model of international trade with heterogeneous firms and global value chains. Firms access new varieties when breaking into any foreign market and jointly choose where to import from and to export to. The unit production cost depends on the importing/exporting strategy of each firm as well the strategy of a firm's direct and indirect suppliers, giving rise to complementarities across firms decisions. In general, the model admits multiple equilibria. In this context, we study the consequences of trade disruption between two countries on global trade flows and show that aggregate trade flows can be complements rather than substitutes. As a result, any trade disruption between two specific countries propagates to all other trading partners through the network of input-output linkages. Hence, imposing sanctions to one country leads to a reduction in trade between all other countries.
Optimal City Diversification (with Simon Fuchs)
Employment sensitivity in Network Economies (with Shekhar Tomar)