活动内容

Topic

Ripples into Waves: Trade Networks, Economic Activity, and Asset Prices

Speaker

Huancheng DU

Postdoc, Princeton University

Abstract

We exploit information in sovereign CDS prices and the international trade network to reveal novel facts about the propagation of global macroeconomic shocks. We show that trade links are an important source of shock transmission using identification through heteroskedasticity, credit/equity return predictability, and a natural experiment. News about country fundamentals flows primarily from importers to exporters, depends on both direct and indirect links in the trade network, and is magnified by the exporting country’s financial vulnerability. We provide the first macroeconomic confirmation of the importance of the trade network to shock propagation in global markets that uses forward-looking financial variables.