International Evidence on the Determinants of Trade Dynamics

This paper provides some new empirical perspectives on the relationship between international trade and macroeconomic fluctuations in industrial economies. First, a comprehensive set of stylized facts concerning fluctua- tions in trade variables and their determinants is presented. A measure of the quantitative importance of international trade for the propagation of domestic business cycles is then constructed, focusing on the role of exter- nal trade as a catalyst for cyclical recoveries. Finally, structural vector autoregression models are used to characterize the joint dynamics of out- put, exchange rates, and trade variables in response to different types of macroeconomic shocks. (JEL E32, F41, F10)