Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25074
Authors: 
Scholl, Almuth
Year of Publication: 
2005
Series/Report no.: 
SFB 649 discussion paper 2005,055
Abstract: 
This paper analyzes the impact of limited enforceable international loans on international risk sharing and trade fluctuations in a two-country two-good endowment economy. Our specification of the punishment threat allows the exclusion from trade to last only finitely many periods and distinguishes between financial autarky and full autarky. Quantitative results show that limited enforceability substantially alters cross-country consumption correlations and the dynamics of net exports. In contrast to existing studies, risk sharing is low for large elasticities of substitution between the domestic and foreign goods. However, it remains challenging to explain the high volatility of the terms of trade empirically observed.
JEL: 
E32
D52
F34
F41
Document Type: 
Working Paper

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