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  5. Interest Rates and World Trade: An "Austrian" Perspective

AEA Papers and Proceedings

ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)

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Interest Rates and World Trade: An "Austrian" Perspective

  • Pol Antràs
AEA Papers and Proceedings
vol. 113, May 2023
(pp. 65–69)
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Abstract

I develop a framework to study the interplay between world trade and interest rates. The model incorporates an explicit notion of time and production length, in the "Austrian" tradition of Bohm-Bawerk (1889). Changes in the interest rate affect production lengths, labor productivity, and the financial costs of exporting. I decompose the response of the volume of world trade to changes in the interest rate into four components: a labor productivity effect, a "propensity to consume out of labor income" effect, a "temporal dimension of variable trade costs" effect, and a "selection into exporting" effect.

Citation

Antràs, Pol. 2023. "Interest Rates and World Trade: An "Austrian" Perspective." AEA Papers and Proceedings, 113: 65–69. DOI: 10.1257/pandp.20231026

Additional Materials

JEL Classification

  • B53 Current Heterodox Approaches: Austrian
  • D21 Firm Behavior: Theory
  • E14 Austrian; Evolutionary; Institutional
  • E43 Interest Rates: Determination, Term Structure, and Effects
  • F11 Neoclassical Models of Trade