Foreign trade

17.08.2021

Improving Methods for Policy Analysis of Foreign Trade and Investment

It is of crucial importance that economic policies related to trade and investment are based on a solid understanding of the mechanisms through which enhanced internationalization of German firms affect the domestic economy.

Against this backdrop, this project pursues four goals. First, it aims at taking stock of the relevant micro-data that are provided and maintained by the statistical offices on both the federal and the state level (DESTATIS) and by the central bank (Deutsche Bundesbank) and examining whether these data may – after suitable adjustment (merging, linking) – be used for model-based quantitative policy analysis in the areas of trade and foreign investment. Secondly, taking the new quantitative trade theory as a point of departure, it aims at developing and empirically implementing simulation models for trade and investment that allow for firm heterogeneity and dynamic adjustment. Thirdly, such models will be used to address, by means of numerical simulations, various policy scenarios regarding international trade and investment. These simulations will focus on heterogeneous effects among German firms. And finally, the project involves econometric estimation, using novel micro-panel-data, aimed at shedding light on topical issues related to trade and investment.

IAW is particularly concerned with the first and second project objectives.

Recent papers:

Fauth, M., B. Jung and W. Kohler, German Firms in International Trade: Evidence from Recent Transaction-level Data, accepted for presentation at the European Trade Study Group (ETSG) 2021 Ghent.