NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Ina Simonovska

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Working Papers

August 2011Asset Liquidity and International Portfolio Choice
with Athanasios Geromichalos: w17331
We study optimal portfolio choice in a two-country model where assets represent claims on future consumption and facilitate trade in markets with imperfect credit. Assuming that foreign assets trade at a cost, agents hold relatively more domestic assets. Consequently, agents have larger claims to domestic over foreign consumption. Moreover, foreign assets turn over faster than domestic assets because the former have desirable liquidity properties, but represent inferior saving tools. Our mechanism offers an answer to a long-standing puzzle in international finance: a positive relationship between consumption and asset home bias coupled with higher turnover rates of foreign over domestic assets.

Published: Geromichalos, A., and I. Simonovska (2014): “Asset Liquidity and International Portfolio Choice,” Journal of Economic Theory, 151(1), 342-380.

February 2011The Elasticity of Trade: Estimates and Evidence
with Michael E. Waugh: w16796
Quantitative results from a large class of structural gravity models of international trade depend critically on the elasticity of trade with respect to trade frictions. We develop a new simulated method of moments estimator to estimate this elasticity from disaggregate price and trade-flow data and we use it within Eaton and Kortum's (2002) Ricardian model. We apply our estimator to disaggregate price and trade-flow data for 123 countries in the year 2004. Our method yields a trade elasticity of roughly four, nearly fifty percent lower than Eaton and Kortum's (2002) approach. This difference doubles the welfare gains from international trade.

Published: Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50. citation courtesy of

July 2010Income Differences and Prices of Tradables: Insights from an Online Retailer
w16233
I study the positive relationship between prices of tradable goods and per-capita income. I develop a highly tractable general equilibrium model of international trade with heterogeneous firms and non-homothetic consumer preferences that positively links prices of tradables to consumer income. Guided by the model’s testable prediction, I estimate the elasticity of price with respect to per- capita income from a unique dataset that I construct, which features prices of 245 identical goods sold in 29 European, Asian, and North American markets via the Internet by Spain’s second largest apparel manufacturer—Mango. I find that doubling a destination’s per-capita income results in an 18% increase in the price of identical items sold there. Per-capita income differences account for a third, whil...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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