Last edited by Statistics Canada
03.07.2021 | History

1 edition of Firm response to price uncertainty found in the catalog.

Firm response to price uncertainty

tripartite stabilization and the western Canadian cattle industry

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        StatementStatistics Canada
        PublishersStatistics Canada
        LC Classifications1990
        The Physical Object
        Paginationxvi, 123 p. :
        Number of Pages80
        ID Numbers
        ISBN 10nodata
        2Research paper series (Statistics Canada. Analytical Studies Branch) -- no. 31

        nodata File Size: 10MB.

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Firm response to price uncertainty by Statistics Canada Download PDF EPUB FB2

The left panel shows that US imports from countries with high fixed costs low EODB have large-amplitude responses to our measure of uncertainty shocks, but the right panel shows that countries with low fixed costs high EODB have relatively small-amplitude responses in comparison.

We thus adopt a partial equilibrium approach to keep the model tractable. To do this, we need to construct a set of plausible exogenous shocks Firm response to price uncertainty the uncertainty variable that match its observed outcomes in the crisis and then feed them into the VAR model to obtain predicted paths for imports and IP that can be compared to actual post-2008 outcomes.

This shift leads to a strong downward adjustment of input inventories and thus a strong decline in imports. They find that trade rises in response to a second-moment shock. This is different from our setting, where the probability of getting hit by a shock changes symmetrically for all firms, and trade falls in response to a second-moment shock.

Overall, these simulations show that if we push hard on these very specific shocks, our model can explain perhaps around half of the import collapse out to the twelve-month horizon. The fact that such goods have to be ordered frequently means that importers have little choice but to keep ordering them even if uncertainty rises. US aggregated monthly real import volume.

Trade and Uncertainty

This may well match the reality of 2008 and is an approach we explore in section. However, in some key respects, our data requirements are much larger. The first section briefly Firm response to price uncertainty out the empirical VAR methods we employ. Uncapped values for the Black Monday peak are 58.

The same might then be said of theories of the trade collapse that rely on negative productivity shocks. The left panel of figure shows the effect of using the value f D from above that corresponds to an average interval of 85 days between domestic orders compared to the baseline value f F that corresponds to 150 days.

This parameterization is also consistent with Bloom et al. The overlap between these two sources allows us to work with 51 individual sectors. This suggests our approach should be viewed as a partial attempt and complementary to other explanations put forward in the literature on the Great Trade Collapse, such as trade credit shocks, especially in the acute phase of the crisis see section.

Only those firms are able to cover the higher fixed costs of sourcing inputs from abroad. Some types of imports observed in the data are inherently difficult to store as inventory—for instance, nondurable goods.

Trade and Uncertainty

They roughly double the standard deviation in the high-uncertainty state at the aggregate level. But since changing suppliers entails switching costs, an extensive margin response might also make the effect of an uncertainty shock more persistent in the aggregate.

IRFs Disaggregated by Durables and Nondurables for Trade and IP Having established empirically that trade reacts more negatively than IP to an uncertainty shock, we next look at the same responses at a disaggregated level.

Conclusion We argue that trade can be modeled as reacting to uncertainty shocks in theory and in practice. We assume that K D and K F are differentiated through the Armington assumption so that firms need to import both types.