{"title":"Risky Gravity","authors":"Luciana Juvenal, Paulo Santos Monteiro","doi":"10.1093/jeea/jvad060","DOIUrl":null,"url":null,"abstract":"We consider the canonical trade model with heterogeneous firms, love for variety and trade costs, and integrate it in the consumption CAPM model. This yields a structural gravity equation that includes an additional factor related to risk premia. Empirical evidence based on firm-level data confirms the importance of cross-sectional heterogeneity in risk and time-varying risk premia to shape bilateral trade flows. The structural gravity model augmented to account for fluctuations in risk premia offers a compelling explanation for trade collapses during abrupt economic downturns.","PeriodicalId":48297,"journal":{"name":"Journal of the European Economic Association","volume":"24 S56","pages":""},"PeriodicalIF":3.9000,"publicationDate":"2023-11-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of the European Economic Association","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1093/jeea/jvad060","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
We consider the canonical trade model with heterogeneous firms, love for variety and trade costs, and integrate it in the consumption CAPM model. This yields a structural gravity equation that includes an additional factor related to risk premia. Empirical evidence based on firm-level data confirms the importance of cross-sectional heterogeneity in risk and time-varying risk premia to shape bilateral trade flows. The structural gravity model augmented to account for fluctuations in risk premia offers a compelling explanation for trade collapses during abrupt economic downturns.
期刊介绍：
Journal of the European Economic Association replaces the European Economic Review as the official journal of the association. JEEA publishes articles of the highest scientific quality and is an outlet for theoretical and empirical work with global relevance. The journal is committed to promoting the ambitions of the EEA: the development and application of economics as a science, as well as the communication and exchange between teachers, researchers and students in economics.
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