Macroeconomic Analysis on the Basis of Trade Theory: A Review Essay

Gao, Xiang (2009): Macroeconomic Analysis on the Basis of Trade Theory: A Review Essay.

Abstract

This paper reviews the branch of literature that applies models developed in international trade theory (Microeconomics) to explain phenomena found in international finance (Macroeconomics). Among all international trade models, the New New Trade Theory with productivity heterogeneity across firms in the same industry has proved to be a powerful tool to bridge the gap between international trade and finance. As a result, this review focuses on several papers in this nascent field, where the behavior of macroeconomic indicators are generated from sound microeconomic foundation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Heterogeneous firm; Price fluctuation; Innovation
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

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