Economics, Econometrics and Finance
6 years ago

Global trade fluctuations driven by expectations could reshape economic landscapes worldwide.

International Journal of Economic Theory
Trade and indeterminacy revisited
Kazumichi Iwasa, Kazuo Nishimura, Makoto Yano

Paper Summary

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The article explores how international trade can lead to unpredictable changes in the distribution of wealth between countries due to households' expectations. Trade can cause fluctuations based on what people anticipate will happen. These fluctuations can happen even when countries are not trading, and they become more likely when both countries are unsure about their economic future.