Risky Gravity

Luciana Juvenal; Paulo Santos Monteiro

doi:10.1093/jeea/jvad060

Risky Gravity

Luciana Juvenal, Paulo Santos Monteiro

Economics

Research output: Contribution to journal › Article › peer-review

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.

Original language	English
Pages (from-to)	1590-1627
Number of pages	38
Journal	Journal of the European Economic Association
Volume	22
Issue number	4
DOIs	https://doi.org/10.1093/jeea/jvad060
Publication status	Published - 1 Aug 2024

Bibliographical note

Access to Document

10.1093/jeea/jvad060

Risky Gravity JEEA August 2023
© The Author(s) 2023. This is an author-produced version of the published paper. Uploaded in accordance with the University’s Research Publications and Open Access policy.
Accepted author manuscript, 808 KBLicence: CC BY

Cite this

@article{8e21c19a4dda435d9670cca0f45f7e1c,

title = "Risky Gravity",

abstract = "We consider the canonical trade model with heterogeneous firms, love for varietyand trade costs, and integrate it in the consumption CAPM model. This yields astructural 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.",

author = "Luciana Juvenal and {Santos Monteiro}, Paulo",

note = "{\textcopyright} The Author(s) 2023. This is an author-produced version of the published paper. Uploaded in accordance with the University{\textquoteright}s Research Publications and Open Access policy. ",

year = "2024",

month = aug,

day = "1",

doi = "10.1093/jeea/jvad060",

language = "English",

volume = "22",

pages = "1590--1627",

journal = "Journal of the European Economic Association ",

issn = "1542-4774",

publisher = "Wiley-Blackwell",

number = "4",

}

TY - JOUR

T1 - Risky Gravity

AU - Juvenal, Luciana

AU - Santos Monteiro, Paulo

N1 - © The Author(s) 2023. This is an author-produced version of the published paper. Uploaded in accordance with the University’s Research Publications and Open Access policy.

PY - 2024/8/1

Y1 - 2024/8/1

N2 - We consider the canonical trade model with heterogeneous firms, love for varietyand trade costs, and integrate it in the consumption CAPM model. This yields astructural 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.

AB - We consider the canonical trade model with heterogeneous firms, love for varietyand trade costs, and integrate it in the consumption CAPM model. This yields astructural 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.

U2 - 10.1093/jeea/jvad060

DO - 10.1093/jeea/jvad060

M3 - Article

SN - 1542-4774

VL - 22

SP - 1590

EP - 1627

JO - Journal of the European Economic Association

JF - Journal of the European Economic Association

IS - 4

ER -