Abstract: International trade not only connects global production but also drives cross-country knowledge diffusion, which we show, is key to understanding international business cycles. Using multi-country data on trade, patents, and citation network, we document three empirical patterns: stronger trade linkages are associated with more synchronized business cycles at both short and medium horizons, knowledge spillovers operate through trade and align with the global citation network, and trade disruptions depress innovation and reduce cross-country patent citations. We then develop an international real business cycle model in which knowledge diffusion via trade shapes innovation efficiency and thus aggregate productivity across countries. Our model yields high international co-movement as observed in the data, without relying on exogenous correlated shocks across countries. Our model therefore suggests that any shocks to trade, even short-lived, can lead to persistent global economic slump as it impedes knowledge diffusion and innovation. 

Abstract: This paper shows that inventories buffer the transmission of shocks through domestic and international production networks. Using sectoral trade and production data, I demonstrate that increased upstream and downstream linkages in production networks intensify shock propagation, while inventory holdings mitigate these effects. I develop a multi-country, multi-sector international real business cycle model that integrates inventory investment, production networks, and sector-level productivity shocks. I show that the model is consistent with empirical evidence on the amplifying effects of production networks and the dampening effects of inventory holdings. Furthermore, incorporating inventory investment enhances the model's ability to accurately capture production comovement, volatility, and cyclicality across countries and sectors.

Abstract: We develop a decomposition framework and use confidential U.S. Census data to show that pass-through to U.S. import prices during the U.S.–China trade dispute is incomplete among firms that continue importing the same products from the same countries. Previous findings of complete pass-through reflect a reallocation of imports toward higher-price firms and costlier new supplier relationships within product–country markets. We then build a model with firm-level import prices and sourcing strategies and estimate that most welfare losses arise from extensive-margin effects on the import price index, driven by sourcing adjustments of importers.  

Abstract: We disentangle the intertwined roles of sales adjustment frictions and production adjustment frictions. We develop a dynamic general equilibrium heterogeneous firm model of international trade to study labor dynamics and export dynamics jointly. To export, heterogeneous plants pay sunk costs as well as variable trade costs, which depend on the history of exporting status. Plants' employment decisions are subject to convex and non-convex labor adjustment costs. Matching the model to the salient features on employment, sales and exports in Colombian plant-level data, we recover measures of a range of export and labor adjustment frictions. We relate these measures to those from models that abstract from either export frictions or labor adjustment frictions. We find that both export frictions and labor adjustment costs are essential for capturing the labor growth distribution, labor dynamics, churnings in export market, and labor growth premiums around the export margin.

Abstract: During the U.S.-China trade dispute, trade flows between the two nations are redirected through an intermediary country. I develop a novel merged dataset encompassing China-Intermediary trade and U.S.-Intermediary trade. I construct a trade dispute tariff exposure measure for the intermediate country, utilizing the average U.S. import tariff on China weighted by U.S. import from the intermediary. Through a Difference-in-Difference analysis, I document that the high-tariff-exposed countries experience a larger increase in the export to U.S. and the import from China than the countries with low exposure. The intensity of rerouting is heterogeneous across industries. Agriculture, being more challenging to relocate and involving fewer production stages, exhibits lower rerouting intensity than non-agriculture. Additionally, this rerouting phenomenon acts as a mitigating factor against the adverse impact of U.S. tariffs on Chinese imports. Notably, the trade elasticity of Chinese exports is overstated by 0.2 when not accounting for trade rerouting.