Dynamics of Firms and Trade in General Equilibrium (preliminary)

This paper develops a dynamic general equilibrium model that tries to reconcile the observation that aggregate movements of exports and imports are "disconnected " from real exchange rate movements, while \u85rm-level exports co-move signi\u85cantly with the real exchange rate. Firms are heterogenous, facing recurrent aggregate and \u85rm-product speci c productivity shocks, choose which goods to export, and decide to enter and exit the business endogenously. We calibrate and estimate the model with both aggregate and rm level data from Japan. We appreciate the helpful comments of the participants of various conferences and seminars. This researc