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International Business Cycles: The Quantitative Role of Transportation Costs



Publishing details

Economics Discussion Paper Series

Authors / Editors

Ravn M O;Mazzenga E

Publication Year



We evaluate the quantitative effects of introducing costs of transportation into an international trade model. We model these costs through the introduction of international transportation services sector. Costs of transportation have substantial long-run effects on welfare and may impact on the pattern of trade. However, the business cycle effects on relative price movements and on international comovements are less pertinent since decreased trade volatility counteract the effects of transportation cost variations. Nevertheless, it is also shown that costs of transportation combined with delivery lags have important for the go a long way towards resolving, in particular, the international comovement puzzle.

Series Number



Economics Discussion Paper Series

Available on ECCH


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